RER has conducted an ongoing series of interviews with rental people regarding how they did in 2010 and their expectations for 2011. Howard Hicks of San Antonio-based Holt Caterpillar offers his thoughts on rental rates, partnering with other rental companies and the economy.
RER: How has 2010 been for you compared with 2009? Did business improve in the second half of the year?
Hicks: Our business began the year very weak, but began improving in March and has stayed strong ever since.
What are your expectations for 2011?
We expect business to be up around 20 percent over 2010. New sales, rental, used, parts and service are all improving.
Did you buy inventory/fleet in 2010? Do you expect to increase your capex on fleet on 2011?
We have made investments in new inventory and plan to continue increasing new inventory in the coming year. Rental fleet inventory levels are currently below Jan 1, 2010 levels, but will increase through time going into 2011. Product availability from manufacturers will dictate our ability to increase inventory levels to support anticipated demand in 2011.
How were rental rates in 2010 and do you expect rate improvement in 2011?
Rates remained depressed throughout the year, however better than 2009. We expect continued improvement in 2011.
Did you make any changes in your business in 2010 — new markets, new software, increased or reduced staff, new equipment areas, new marketing techniques?
We took advantage of strength in the Ag business to ramp up that segment of our company. We also became a SITECH (Trimble) dealer and a Screen Machine dealer. We are in the process of a significant upgrade to our dealer business operating system. We began increasing staff, mostly service techs, around mid-year and continue to ramp up service. We began development of an eBusiness platform for email marketing and conducted comprehensive product training for the entire sales force (prime product sales). We changed sales/rental management by consolidating all rental reps, general construction (small machine) reps and general line reps under the regional sales managers. The objective was to get improved coverage and better collaboration among different types of reps to do a better job of serving the end user.
We worked with some other dealers to develop new, much improved rental fleet management software. We consolidated the operation of our rental services fleet (mid-sized machines and smaller) with our heavy Cat rental fleet to improve coordination and increase utilization of the fleets. We still account for the two fleets differently, but they are managed by the same people.
Do you have any changes planned for 2011 that you can discuss?
Expand partnerships with independent rental houses in less urban areas.
Are your customers more optimistic for 2011? How do you expect the business environment to change in 2011?
Customers are mildly optimistic, but still struggling. The only strong markets are petroleum exploration, production and distribution in several areas of our territory. Highway construction is strong in a couple of our regions.
What is your expectation for the economy in your regions in 2011; any expectations for the national economic picture?
We anticipate slow, but gradual improvement in the state and national picture. It appears that several MSAs in our territory are projected to be leading the recovery.
Any other characteristics or changes in your business or the business environment that you’d like to discuss?
If the state legislature does not provide more funding for transportation, we will see a significant decline in highway construction beginning in 2012. Texas, like many other states, is struggling to handle a significant deficit. This will mean significant reductions in state spending, which coupled with declining tax revenues in other levels of government, will mean less governmental sales of equipment and services. The introduction of Tier-4 product will present challenges for dealers for sales and rental customers.
