Gerry Plescia hopped into the Hertz Rental Equipment Corp. president's saddle in 1997 with a preference to grow the business through greenfield startups instead of acquisitions. With a veteran management team and experienced branch managers he's done both, doubling worldwide rental revenue while rounding up new companies and improving existing store performance. Plescia shared his thoughts with RER on the current state of the rental industry, HERC's plans for the future, and just where the industry is headed.
RER: Industry consolidation has slowed of late. Why?
Plescia: There are a number of reasons for it: The (lack of) availability of capital through equity markets has hurt, and the economic slowdown has hurt spending. Also, the pace of consolidation has been so rapid that the industry just needs to take a breather. In addition, there is a smaller volume of companies available for sale.
A few years ago you said HERC was not going to acquire a lot of companies, instead focusing on greenfields. Do you still feel that way?
We have grown the company through greenfields and acquisitions. Since 1997, we've more than doubled revenue and our total location count, and we've purchased over 25 different companies. We could have grown faster, however, in some cases it was a question of what was available and what would fit into our long-term growth strategy. You have to measure value versus price before buying.
What is your outlook for HERC this year and in the future?
Not much has changed for us in terms of our growth strategy. Capital availability is certainly not an issue. (Like many large rental companies) we've slowed a bit too with the recent decline in construction spending. But overall, our strategy won't change. Where there's value for us and we can integrate successfully, we'll consider acquisitions.
It's been a tough year for most of the publicly traded rental companies with stock prices falling drastically. Hertz seems to have weathered that storm. Why?
HERC has been in this business 35 years and most of our people, from company executives to branch managers, have over 15 years experience. That helps. I also think we've managed our growth well and we will continue to do that so we remain in business for the next 35 years.
Companies are cutting employees seemingly across the board. HERC has also laid off staff. How has that impacted business?
Late last year we did make some staffing cuts and some other changes within the company in order to better structure the business. Those changes were made for the better.
How much did HERC grow in North America last year?
In 2000, we saw approximately 13 percent revenue growth worldwide, the majority of which occurred in North America.
What trends do you see developing in rental in the next few years?
The good news is there will continue to be the inherent shift from ownership to rental. I also see an increase in information technology. There will be more real-time decision making and an improved flow of information between the rental companies and their customers.
Equipment rental over the Internet is struggling. What role do you see the Internet playing in the rental industry in the years ahead?
Internet equipment rental is not a significant business issue right now and I don't see a tremendous amount of business being done over the Internet. It will increase over time but the Internet is going to be more valuable as an information source. Equipment rental is a people-contact business. It's a people-relationship business and that's not going to change.
What about the role of dealers in the rental channel?
Most of the OEMs already have national accounts with the major rental companies but I don't see the elimination of the niche that dealers have in this industry. Retail customers will always need the dealerships for new equipment purchases, parts and service and rental companies will need parts and service support as well.
HERC has developed a strong European presence in recent years. Will that continue?
Just as we do in North America, we will evaluate those areas for growth to determine if they can be successfully integrated into our company.
Many people in the rental industry might be uncertain how Hertz's acquisition by Ford Motor will impact them. What can they expect?
We've had a strong relationship with Ford the last 15 years. Ford owned 80 percent of Hertz before buying the remainder (in March). All I can tell people is that it will be business as usual.