The Story Behind the Numbers

Sept. 1, 2002
RER: First of all, since you aren't really known to too many people in the rental industry in the United States, could you tell me a bit about who is

RER: First of all, since you aren't really known to too many people in the rental industry in the United States, could you tell me a bit about who is Freek Nijdam, and your career in the equipment industry?

Nijdam: I started 32 years ago with Atlas Copco. Prior to that I was with Bostitch Co., a manufacturer of staple machines. I started with Atlas Copco in Holland in 1970, and in 1978 I became involved in international sales and marketing, responsible for portable compressor sales worldwide, based in Belgium. That was my first contact with rental companies. At that time, the biggest rental companies were in the United Kingdom, where rental companies dominated the construction equipment market. Our Atlas Copco sales companies had strong relationships with rental companies.

In 1986 I went to spend two years in Mexico responsible for Atlas Copco Mexicano, so yo hablo un poco de espanol. I went to Germany in 1988 to work with the compressor division. In 1995 I became head of the mining and construction business area and also became senior executive vice president of the Atlas Copco Group. I did that for six years, which is the longest I've been in any one position with Atlas Copco. In December Giulio Mazzalupi asked me to come to Arizona to work with Rental Service, which was under-performing at that time. On February 6th, I arrived here in the United States.

Personally I'm happily married, I have one daughter who lives in Holland and my wife is coming to the United States shortly. I like sports. I played semipro basketball and I played basketball in the Air Force. I was a soccer referee for 10 years as well. I still get up some mornings at 5 a.m. to jog and I play tennis every week.

What needed fixing at RSC?

The main thing is to restore the company to be in line with what the shareholders want, which is to get a reasonable return. At the moment that return is not there, so our top priority is profitability. External and internal factors have led to a substandard result. Maybe there was not enough focus on what we're supposed to be, which is a rental company. So the priority is to return to a focus on renting. I found there was a lack of focus on that issue. Rental companies do a lot of other activities, but first and foremost their mission must be to rent at a profitable price, and that's an issue that I want to bring not only to Rental Service but also to our competitors in the United States.

The future trend in equipment usage is rental, and that's the trend irrespective of the current marketplace. I believe that here in the United States, we will follow Europe's lead in the rate of penetration. If rental is in fact the trend, then that's a great thing for our future. It can't be achieved with customers renting at prices that will kill rental companies, and the responsibility for that is with rental companies, not with the customer. We have to stand up for that.

All companies now have this problem of deteriorating rental rates. Here at Rental Service, we are making efforts towards increasing prices. That doesn't mean that the customer has to suffer. It is in the best interests of the customer to give us a reasonable price. If the customer finds it is better to rent than to buy, then he has to realize that if he saves money by renting rather than buying, we need part of the take in that. If we restore our price levels and manage those price levels, we can all make a profit.

What kind of role do you expect management to play in a rental company?

Rental is a local business and circumstances change everywhere, and here is where the management of the company comes into play. If the market in a certain local situation has too much equipment and the local management becomes desperate to rent at any price, it's the responsibility of upper management to help local people by taking away some of the fleet and not destroying price levels. If they say the price is very competitive on certain projects, I appreciate that. But we cannot continue to operate this way.

The rental industry has not learned what, for example, the airline industry has learned. If I call an airline, I ask what's the best price? They might say $300. Let's say two weeks later, I call again and the same person says $500. So I say “I called two weeks ago and the price was $300. The same plane, the same seat. So what has changed?” The answer is simple — because it's two weeks later. The rental industry has not learned this, convinced that once you quote a price you cannot change it.

If I am happy with that airline, if the plane is clean, and the people are nice, I'll happily pay $500 if I can't get the $300 price. If you have a good relationship with your customer, you can get a better price.

I come out of the construction equipment industry, which is very competitive. The customer wants quality, delivery and price, and we have to provide quality equipment and price. Good equipment delivered at the right time will always be worth paying for. In this world of consolidation, even we large companies have relatively low market share. No one player has 30 percent of the U.S. market so there is a lot of room in which to grow.

My impression is that RSC has been retrenching, closing some branches, struggling to keep up in the current slow marketplace. Is this accurate?

I look at it a little differently. In the merger of two companies we have closed some branches. My goal is to grow the business. So in that process, we will look at each individual store. Those that are not performing might be closed but the only reason to close the branch would be if the market is weak around that store. We have our model for expansion and that's the goal.

How is business overall? How has the first half of 2002 been for RSC compared to past years, compared to expectations?

I am not a pessimist by nature, I probably wouldn't be here if I was. But in my business life, I look at it differently. There are better and worse times, that's part of life. When the upturn comes, you are invested for it. I am not too optimistic for the U.S. construction market in general for 2002. Everybody said in the second half it will come; we all know now it won't come. So we are ready and live day by day.

Are there particular segments of the rental marketplace that RSC is likely to concentrate more on over the coming year or so?

If you want to grow the business as a total business, the general construction market is much bigger than the industrial or energy markets. We want to participate with general construction and grow with it. In the other two segments, which are more niche-oriented applications, we have unique products, and we have some processes that may not be matched by our competitors. We want to make those parts stronger, but I don't expect them to grow as fast as general construction.

RER: What kind of manager/leader are you? What are your strengths and unique characteristics?

I already have some nicknames here. Some call me HP, like Hewlett Packard, a human calculator. I like the numbers game. For every story you have here, there are numbers, so you see if they work and try to follow up. You can say: “I can sell more,” but you have to be able to follow up. I'm very detail-oriented, very hands-on. To me being close to the customer is most important. I like to visit customers and our locations. I have visited many. I like to go to the regions and talk to the people more than sitting in an executive office. I believe in guided democracy and communication. But to succeed, democracy alone can't work.

The goal is to deliver the product and exceed customer expectations, and to do it in an economical way. I have a definition of business — it's only a business if two or more people are making money. Then it's business.