Dennis Von Ruden, president of General Equipment, has more than three decades of experience manufacturing surface-preparation products for the rental industry. RER recently spoke with him about the current economy and what it will take to be competitive in it, manufacturing in China and why people should attend this year's rental show.
RER: You said, in regard to 2010, that if business is flat, that would be good. A far cry from a few years ago, isn't it?
Von Ruden: I haven't talked to any small manufacturers that are doing well — we kind of huddle together according to size — and are looking for a real proactive 2010. A lot is going to be attitude, how much confidence the market has in making a decision to move forward. And we're trying to take a proactive approach, which you'll see in our marketing materials. But people are still holding on to their billfolds. And nothing is going to happen, they can give us all the money they want to hire people, it isn't going to happen until there's confidence and confidence drives demand. I see nothing on the horizon, even from the large national chains. We'll see what they're buying and what their purchasing level is, but we're all sitting around waiting for something to happen that gives us the incentive to go out and do something.
We're looking for some leadership, for someone to say it's OK to go out and buy now, it's OK to start running your business in a proactive manner. Rather than huddling around waiting for the sky to fall, maybe we should be making sky poles to hold the sky up. That's what it's going to take and I just don't see that in the industry yet. I don't see the confidence and when you're talking to manufacturers that have lost 75 percent of their workforce, how do you recover from that in six to nine months? You don't.
In speaking with some of the small manufacturers, are some in danger of completely going out of business?
That is a concern on both sides of the spectrum. We're going to be looking at customer bases. How many equipment rental people, contractor supply houses will fail in 2010? We know lots are in trouble out there and I think you're going to see vendors big and large be affected by this. You can only cut back so far, you've got a building, you've got built-in overhead, you can get rid of all your people but you still got to pay your taxes and your insurance and everything else. If this thing goes on, if we don't see the market rebound more positively by the third or fourth quarter, it's going to be tough. I don't know of anybody who really had a positive “in the black” year. And the question is try to minimize the money you're losing or try to stabilize to the point that you're breaking even and then ride this thing out until you start to see some blue sky.
To many, a ray of hope has been that some of the stimulus money will start getting to work in actual projects, although not much of it is likely to benefit rental.
What I've been hearing from rental store people and supply house people is that so much of the stimulus stuff that has been spent really affects just a small number of people. There was not the triple-down effect that they were hoping for. You're going to have to get the individual homeowner and small contractor, the one-, two-, three-, four-, and five-employee-type builder back working. Everyone I know of in our home town here is desperate for work. That's going to be the stimulus that's going to drive the smaller stores and even the larger chains to start doing something. They are looking for projects, big and small. When you got homebuilders doing roofing to stay busy, that tells us where we are.
You mentioned surface-preparation will lead the way as the infrastructure deteriorates, when do you see that increasing?
When people start putting money back into infrastructure, i.e., their own buildings, their garage floors, sidewalks, plant floors and stuff like that, that will drive our surface-prep business to a certain degree when people want to spend money in that direction. Hole-digging equipment usually lags behind construction. Two or three years later after we see big building going out, then the homeowners' payments start to stabilize, they feel good, they build decks and fences, they start doing improvements on their houses.
That's the kind of stuff people spend money on when they have confidence that they're going to have a stable paycheck. There's no confidence now.
What trends do you expect to see in the type of equipment your company manufacturers in 2010?
We are beginning to source products directly from China manufactured to our specifications in order to remain competitive in what we anticipate will be an even more competitive marketplace. We've been buying components from China since the mid-90s, castings and forgings and things like that. Mainly because the U.S. government has done a great job at driving out small foundries and small forging houses. But the cost of manufacturing and the pressure of how much you can charge for a product is forcing us to go overseas and have products built to our specs because our name is going to be on them and it has to be good. And we can buy it for a fraction of what we can make it for in this country. Not every product is that way, but there are certain products in our line that lend themselves for that.
Are you happy with the quality?
Yes, but you have to drive it, you have to be there, you have to tell them what you want.
What do you expect from this year's Rental Show?
I'm trying to be optimistic. We've got to be there, we can see that people have cut their space back, they are watching their expenses. My message is and I keep trying to tell people, if you watch too much TV, you won't even get out of bed in the morning. What a guy needs to do is come to the show even if they're not going to buy anything, please come to the show. That's the message that our company has been trying to tell people. Come to the show and learn how to run your business better because we're all trying to figure that out. Come to the show so we can talk to you and keep that business relationship going.
Even though the current scenario isn't great, there are huge infrastructure needs in the coming years.
I would agree. There will be more people and changing demographics. As our population continues to age, what effect is that going to have on infrastructure, on what type of products that we build and how we build them? That's going to be the big question, and how do we deliver those services through our products? That's something we're all looking at and trying to figure out the best plan of attack. You're going to be looking for products that are a little more specialized in nature and products that are going to be in demand. You wouldn't want your daughter to be going out with a guy who sells encyclopedias. That's probably not a long-term-growth stable job. So we've got to figure out what those long-term stable products are going to be because it will quickly change. How we sell products is changing and what we see as products will be changing.
I've seen companies that waited too long to change product lines or evolve their products or they didn't invest or recapitalize into their machinery and they are no longer competitive.
How do you expect rental companies to fare in 2010?
Rates will be very tight based on market demand. Fleet is well worn and needs replacement after four years of reduced capital investment. Cash flow will present a serious challenge to growth.