When Maxim Crane Rental Corp. recently acquired a set of 13 crawler cranes in the 230- to 300-ton range, it was, according to the Maxim management, just part of a series of expansion moves that began, over the past 18 months, with a more than $60 million investment in its crawler crane fleet. RER recently spoke with Maxim Crane president Art Innamorato and Louis Samson, principal of Platinum Equity, which acquired Maxim Crane in May 2008. In the first of a two-part series, RER speaks with Innamorato about Maxim’s fleet-development plans, its business expectations, its safety practices and record, the federal stimulus package and why it is focusing on the industrial market.
RER: You have made some major investments in crawler cranes, and sold off some older units, correct?
Innamorato: Yes, we are repositioning the fleet.
Are you evolving towards certain markets as opposed to others?
That’s part of it. The other part of it is that manufacturers have stopped making certain cranes. There have been technological changes. The industry continues to hold on to what I consider to be obsolete equipment, and the only way for people to really do well going forward is to make sure that the fleet they own is in fact the modern technologically advanced fleet. A lot of people continue to hold on to 20- and 25-year-old lattice-boom type equipment. Manufacturers quit making those models 10 or 15 years ago.
What benefits do those companies see in keeping those types of cranes?
There’s a difference between what a rental house does and what an owner will do. For us, a rental house, we’re looking for mobility, ease of operation, and safer operations to benefit the customer, right? You take some of the older machines that may go to different parts of the world or end contractors, they are not relying on uptime of the machine, they’re going to park it on a park job and only work it for four or five months of the year. But these machines aren’t really rental ready to be available to work 12 months of the year.
That’s number one. Number two, the operators who run those cranes are now in their 60s, and finding operators who are capable of running those machines is increasingly limited. The newer equipment has better-enhanced mobility and better-enhanced safety features on the cranes. They are not free-fall machines.
Are you looking at certain acquisitions, to grow Maxim geographically?
Yes we are in dialog with a number of different people.
Are you considering going outside the crane area, into aerial work platforms or other types of equipment?
We have very few of those. At one time we did have a fleet of what I call lighter lift equipment such as AWPs and manlifts, but we exited that business some three years ago.
How do you see the business in the foreseeable future?
We had a pretty good spike in work in ‘06, ‘07, and for the first half of ‘08. And our view of that was it was just that, a spike, it was not sustainable. So we never really over-reacted to that. We really didn’t increase our fleet count during that two-and-a-half year stretch. We just didn’t do it because when you acquire a piece of equipment, you’re looking at a 15-year period, so you’re not going to react to something for two years.
So our fleet count has stayed pretty steady from ’04 all the way through today. We’re pretty comfortable that with the fleet we have, we are comfortable with what we can utilize and our utilization. The markets have changed, so I don’t expect to see ’06- or ’07-type construction going on for the next three or four years. The condo markets just aren’t there, and in certain parts of the country construction spends are going to be different for a long time and that’s what we all along expected to happen. The commercial building side is going to be slow for a while, the credit markets aren’t really lending into that type of commercial work. Forgetting residential work, it’s also limited into what’s available for commercial work. So we have positioned Maxim over the past five years to focus more on the more complicated type of activities in the industrial and the power sector.
So you’re not surprised by the slowdown?
No. We think we called it perfectly. The way we manage the fleet is really a two-year look forward. We actually talked with some manufacturers last spring, and we said, “Look, our capex needs and requirements for ’09 and ’10 will be a lot lower.” They were all surprised, saying, “We don’t see that in the market.” We said, “it’s going to happen here, the credit markets aren’t working right, and all the types of things people are spending money on have changed dramatically.” So there was no surprise at our end from this.
You have better economists than most people do.
Well, most people think tomorrow is just like yesterday. That’s not the case, and even with the downturn, everyone now thinks tomorrow is just like yesterday, but it’s going to change too.
Do you see the stimulus package as a major benefit?
Some of it. With the stimulus, it’s really sort of keeping the water level at a certain level. So when you looked at a lot of things dropping off, the stimulus is not really adding more to the pile, it’s really just kept the water level at a certain point. You’re just now starting to see stimulus spending, even though people say “shovel ready,” it’s really five, six months before states can actually start to bring things out of the ground. You’ll start to see the effect of the stimulus money in the fourth quarter of this year and into ’10.
Maxim claims to have the crane rental industry’s best safety record, can you elaborate on that?
Sure. Safety has become a broad, almost non-defined term, used broadly everywhere. We define it as the safety operating protocols, the best operating practices and as a consequence of having very sound operating practices. We have very, very few incidents. The verification of that really comes from the companies that provide your insurance. And the number of carriers that actually are willing to invest in this space is dwindling, but we’ve had no shortage of carriers that have proposed on our insurance renewals at prices that continue to drop for us.
You can talk about safety records, you can talk about OSHA guidelines etc., but the real proof is tell me what your losses are, that’s the real proof and ours continue to be exceptionally low and that’s a reflection of having very good operating practices.
When you look at the customer base we serve, these big industrial refineries, they have very strict requirements, so we satisfy those requirements hands down. And in fact you know you’re doing well when certain contractors come up for bid, we’re not even the low bidder but they’re still picking Maxim. So you get this verification every day in the market place. You hear a lot of verbiage about safety but when I cut through it all, it’s really all about tell me what your operating practices are and how do you know that you’re able to work incident free for your customer? It also reflects your maintenance practices on your equipment.
So if you have the insurance companies and your customers looking at you positively, you’re there.
That’s the validation that you get, right?
[RER’s interview with Louis Samson will appear in next week’s edition of RER Reports.]