The year 2001 began as it ended — with uncertainty. But the days following the turn of the true millennium brought few expected disasters as a result. Business continued to boom and construction continued at a record pace.
The second half of the year brought with it more uncertainty, this time caused by the shaky economy. Stocks began to drop and interest rates followed. Then, September 11.
But despite what all Americans and American business owners experienced in 2001, optimism never faltered. Despite layoffs across the country in all industries and ongoing reports of the latest recession, optimism still shines bright — even throughout 2002.
Status of demand
Rental businesses in the Midwest expressed a similar optimism for 2002. Thomas Fouts, Bledsoe's Equipment Rental, Olathe, Kan., and Lee's Summit, Mo., even noted, “We are not experiencing a recession in the Kansas City market area yet.”
According to Marlyn Lepori, rental manager, for Zimmerer Kubota & Equipment, Fort Worth, Texas, demand remains good for the rental business in the Dallas/Fort Worth metroplex. “Though it may be down a little bit, it is not bad overall,” he said.
Steve Diestsch, who recently acquired Anderson Rentals, Mission, Kan., noted that his former employers NationsRent, are staying busy in Columbus, Ohio. “But the areas with more industrial environments such as Cincinnati and Cleveland are suffering more,” he noted.
Business at Dietsch's own store in Mission is faring well because of, in part, heavy construction in the area directly surrounding it. “They are building a new Target across the street and several new restaurants in the area as well,” he says. “Contractors and homeowners are augmenting their fleets with rental equipment in order to save money.”
Customers across the Midwest are reporting positive demand as well. Anita Bjork, rental manager for Newman Rental Service, Indianapolis, reported that mild weather in Indiana has motivated her customers to take advantage of mother nature and complete as many jobs as possible this winter. “Our numbers have remained steady,” she said. “Plus, we have had many requests for machine quotes in recent weeks so we look forward to an early spring.”
Bjork has also observed that customers are keeping their equipment longer, which has led to an increase in the service business at Newman. “Keeping their machines up and running with little downtime has been a challenge,” she said. “But it's a challenge we welcome.”
The housing market in the Indianapolis area has remained steady for moderate to upper income home building, she noted, although the sale and construction of million dollar homes has decreased dramatically.
Bjork also acknowledged, “There is no doubt that the unfortunate tragedy of Sept. 11 contributed to the downturn in our economy. But those of us who really monitored the trends in our industry realized that things were slowing down prior to the terrorist attacks.”
Because they saw the downturn ahead, Newman Rental Service anticipated an increase in the rental end of the business. “We did realize that high turn-around of machines and an optimum level of efficiency had to be put forth in the rental department. We incorporated a staff to answer the rental customers' needs.”
Aged to perfection
The debate about the advantages and disadvantages of aging a rental fleet is alive and well. While some rental businesses choose to age their fleets to conserve capital, those that RER spoke with in the Midwest take a more guarded approach.
“I never was a believer of aging inventory to conserve costs,” explains Fouts. “You can do that to a certain level but the trade off is higher repair expense along with more frequent breakdowns in the field. If you have more breakdowns in the field along with fewer rental opportunities, you have even lower income.”
Dietsch reported that he is not consciously aging his inventory at Anderson Rentals, although “there's a certain amount of making due with what you've got,” he says. In fact, Dietsch is planning some fleet expansion in the next six to 12 months. In an effort to better serve the needs of his contractor customers, he plans to add skid steer loaders, air compressors, light towers and scissor lifts.
Newman Rental Service took a close look at the utilization of its inventory last year, prior to the start of the recession. “As we look at companies that thought that more was better, we are fortunate that we did not buy into that outrageous theory,” says Bjork, who describes Newman's current inventory as streamlined rather than tight. “This requires our company to be very watchful when our industry begins to make a turnaround. Thus, we can increase our inventory without manufacturer delays.”
Customer outlook
Customers of rental companies throughout the Midwest express an overall optimism for the year ahead. According to an article published in The Atlanta Journal-Constitution last month, the recession, which officially began in March 2001, is nearing the 11-month duration of the average post-World War II recession. Reports from nearly every news medium indicate that the economy may be experiencing a weak recovery, and just in time for the busy spring and summer seasons.
The chief economist of the National Association of Manufacturers, David Huether, said that the Conference Board's index of leading economic indicators for December signals that the economy may be headed into positive territory sometime in the first quarter. Those economic indicators rose by a full 1.2 percent in December, the largest one-month advance since February 1996.
“A positive trend has finally emerged, with the leading indicators rising for a third month in a row,” Huether said.
Rental customers are responding favorably to these reports. Fouts explains that his customers are very optimistic about 2002 and Dietsch noted without hesitation that his customers are optimistic about the year ahead.
“Our customers almost seem like everything is normal, so I would say they are very optimistic about their business,” says Zimmerer Kubota & Equipment's Lepori.
Bjork explains the mood of her customers as conservative. “Those who have been through tough times know how to weather a storm,” she says. “The newly established customer is playing it very intelligent too. There has not been an abundance of large machine purchases or buying because of a whim. The customer is putting considerable thought into a purchase these days and weighing every ‘what if.’”
Fouts says of his customers, “They perceive us as a way to accomplish their tasks more effectively and at less cost than buying their own equipment. In fact, many of them have the attitude that they rent equipment now instead of buying it as a strategy to conserve their capital. That in itself is a message we need to be constantly sending out, especially in a recessionary time.”
Brandey Chewning Smith can be reached at [email protected].
