Surviving in the Wild West

Aug. 1, 2007
Ever dreamed of being paid $40,000 per year for building a healthy sub sandwich? How about making around $31,000 just for saying, You want fries with

Ever dreamed of being paid $40,000 per year for building a healthy sub sandwich? How about making around $31,000 just for saying, “You want fries with that?” Welcome to Fort McMurray, a city in northeast Alberta, Canada. It is the true embodiment of a modern-day Wild West city.

High energy prices have rejuvenated the economy throughout Alberta. Oil industry heavyweights such as Suncor Energy, Syncrude and Chevron, among others, have set their sights on the rich Athabasca oil sand deposits near Fort McMurray, establishing operations to help supply oil to North America and the world markets.

The result has been a boom for Alberta, which currently enjoys unemployment rates far below the Canadian national average and, in many areas, reaches theoretical zero unemployment. The province's little-big-city of Fort McMurray is also experiencing a population boom. A city of slightly more than 30,000 in 1999, today Fort McMurray has exploded to more than 70,000 residents. A Regional Municipality of Wood Buffalo, Alberta, report estimates the 2010 population will be between 80,000 and 97,000.

This growth is putting a strain on the city's infrastructure, and housing is at a premium. “The typical single dwelling unit averages approximately $500,000 (Canadian),” says Craig Pisadowski, Fort McMurray branch manager for Hertz Equipment Rental. “Individual rooms are renting for up to $1,200 per month.”

Not only housing is at a premium. Qualified workers, salaries and equipment utilization are all stretched to their limits. “Some local stores simply close down because they can't find enough workers or the cost to retain them is too high,” Pisadowski adds.

Yes, everything is operating at a higher level in “Fort McMoney” (the city's unofficial nickname.) That is except for construction equipment rental rates. Bustling industrial and construction activity has made this area a mecca for rental outlets, creating fierce competition for rental rates and the qualified labor pool.

People first

For rental and construction companies operating in Alberta, and especially in Fort McMurray, “the biggest issue is labor,” says Rob Wilkie, Hertz Equipment Rental Corp. regional manager, fleet operations, Western Canada. Klaus Stallman, general superintendent for Edmonton, Alberta-based Stuart Olson, a subsidiary of the Churchill Group, agrees with Wilkie and adds, “It is definitely more of an employee's market. Instead of the common five- to eight-percent raises, we have to give raises in the 15- to 20-percent range to retain trained employees.”

Creativity plays a key role for rental and construction companies operating in the region to keep employees on the payroll. Currently on a slight reprieve, construction activity is supposed to peak again in 2008. Companies and projects will require more than 29,000 trained workers — all within a city of 70,000. And this does not include the people working on the oil sands projects.

Companies are trying unique approaches to entice workers to the region. Employers are creating staggered work schedules — i.e. work 10 days straight and receive 4 days off — to make their companies more appealing. Workers are being flown in from all over Canada, from as far east as Newfoundland. Since equipment rental companies have to provide 24/7 service, many technicians will work longer hours in a day but receive more days off between work shifts.

To compensate for out-of-control housing costs, just about every company, including rental outlets, with operations in Fort McMurray, offers living allowances. “The standard rate for transient workers is $145 per day tax free,” Pisadowski says. “Even teachers receive more than $1,000 per pay cycle for a living allowance.”

In addition to retention bonuses and living allowances for its employees in northern Alberta, HERC goes the extra mile for employee retention. The company works hard to keep a positive atmosphere at the branches and holds frequent employee appreciation nights with promotional item giveaways. “We do what we can to ensure our employees have a positive work experience with Hertz, which helps keep a low employee turnover rate,” Pisadowski adds.

Fierce competition

As far as rental activity, Fort McMurray is an anomaly for a city its size. The southern Alberta city of Lethbridge, for example, is about equivalent in population, but there are only two rental centers. However, Fort McMurray is “one of the hottest economies in the free world,” Wilkie says, so many rental companies want a piece of the action.

Major rental chains — Cat Rental, Rental Service Corp., Ameco and United Rentals — have locations in Fort McMurray. Hertz operates one main and two satellite locations in the city, employing more than 90 people and offering more than 1,000 pieces of equipment for its customers. HERC's Fort McMurray branches combine to lead the company's Canadian operations in both volume and revenue. “The other locations call us the ‘black hole,’” Pisadowski jokes. “If a piece of equipment gets transferred here from another branch, they don't get it back.”

Some may think that the combination of higher salaries, booming industrial and construction activity, and high utilization rates would automatically translate into higher rental rates. But they would be wrong. According to Pisadowski, stiff competition is keeping rates flat to declining. “The companies that only care about price are cutting their throats to get the rental.” But Hertz has done its best to rise above this sort of rental price war.

The customer base in Alberta is different from that of the typical rental customer throughout much of North America. Primarily industrial businesses related to the oil sands projects, many of these customers measure downtime in multimillions-of-dollars per day. Often working in remote areas, they cannot afford downtime, let alone waiting hours for a service call.

This is why Hertz only rents the top-name products in each equipment category. The company also offers its customers a number of service options. In Fort McMurray, 10 experienced full-time service technicians blanket the territory seven days a week, providing onsite equipment services such as equipment lubrication, fueling and engine servicing.

When an oil plant shuts down for required maintenance, Hertz is there with fully stocked mobile tool cribs, complete with tool barcodes, as a part of its full-service plant shutdown program. “We want to keep our customers focused on what they need to do to be successful,” Wilkie says.

Product differentiation

Operating under different rental company names over the years, the building that serves as HERC's main Fort McMurray branch has been entrenched in the market for more than 20 years. The employees understand what the customers want and need.

Hertz is always on the lookout for new equipment that will help its customers do their jobs more efficiently. “We continually strive to lead the pack in new product introductions,” Pisadowski says. “We were the first to offer the market 135-foot straight and knuckle booms.”

Having the right equipment mix is one thing, but ensuring the equipment will work during Fort McMurray's harsh winter extremes is a totally different subject. For example, the winter before last, the region saw the most snow it has had in 40 years in a winter that basically lasted from October to early May. It was not uncommon for temperatures to reach -4 to -40 degrees Fahrenheit (-20 to -40 Celsius) for long stretches. “The equipment is expected to work in temperatures it just doesn't want to,” Wilkie says.

One of the hottest commodities during the cold winter months are generators. “You cannot find an extra generator during the winter. They are all out on rent,” Pisadowski says. With Canadian Natural Resources Limited, the utility company responsible for establishing the power grid in Alberta, struggling to keep pace with Fort McMurray's rapidly expanding power needs, generators are required to run everything from tools and job trailers to pump jacks and temporary housing for construction workers.

In the late 1990s, the generator market wasn't a big contributor to Hertz's bottom line. The company rented only about a handful of units throughout the Western Canada Region, which stretches from Thunder Bay, Ontario, to Vancouver, B.C. “They were having a problem with generators freezing during the harsh winter conditions,” says Mark Leupi, product manager, Pump, Power & Light for Wacker Corp.

It was at this time that Wilkie and Hertz worked with Wacker to design a set of generator options, designed specifically so the units could operate in extremely low ambient temperatures. The result of this collaboration was the Wacker cold weather package.

The package includes several critical components for the generators: temperature-activated shutters, electronic governor, strip heater for the LCD data management system, lube level maintainer with low oil shutdown, low coolant shutdown — solid state — and a block heater. These components work together to allow Wacker generators to operate in cold weather down to a reported -70 degrees Fahrenheit (-57 Celsius). The set of options is available on the company's entire line of generators, ranging from the 24.4 kVa G25 to the 160 kVa G160.

Through the Wacker collaboration, Hertz has garnished much success with its generator rental line. From about a half a dozen units a few short years ago, Hertz has grown its current generator fleet to nearly 200 units and is planning to add dozens more.

Through a unique combination of product introduction and differentiation, creative employee retention, and dedication to equipment service, Hertz has successfully carved a niche in a fiercely competitive Fort McMurray rental market. It is a model based on serving the customers' needs rather than slashing prices. By focusing on how to make the job easier for its customers, Hertz is not only surviving but thriving in Canada's Wild West.

Rick Zettler is president of Z-Comm, a company specializing in construction and aggregate equipment marketing, public relations and freelance writing. He was recently elected PICA's 2007 Public Relations Person of the Year. He can be at (319) 265-0052 or [email protected].

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