While it may be premature to call NationsRent the first casualty of the first 21st century recession, the Fort Lauderdale, Fla.-based consolidator is clearly in trouble. Unable to meet its loan obligations this month, its stock stock worth about a dime a share at press time, NationsRent's problems are no doubt traceable to management errors that precede the current downturn.
But problems that occur in a downturn can be avoided if companies look ahead and don't become over-leveraged. Still, if conditions were as robust today as they were a couple of years ago, I doubt NationsRent would be considering Chapter 11 bankruptcy. Many companies survive Chapter 11 and go on to greater success than ever, but it's not a stretch to say the current recession is already causing some serious problems, for NationsRent and others as well.
The “will there be a recession” question so popular six to 12 months ago, has been answered and many companies are laying off people and cutting costs in different ways. You have to do what is right for your survival, but I hope rental companies don't feel compelled by NationsRent's troubles to press the panic button.
A decline over the next year could be, to a degree, a self-fulfilling prophecy if you cripple your customer service by letting go of too many people. In our round-table discussion last year on how to survive a recession — see Jan. 2001 RER for details — many of the industry's leading executives, including RSC's Tom Bennett, NES' Kevin Rodgers, Hawthorne Equipment's Tom Hawthorne, Sunstate's Mike Watts and Ahern Rentals' Don Ahern, cautioned strongly against weakening your organization by letting go of good people that aren't easily replaced. There can be a fine line between biting the bullet and shooting yourself in the foot with it.
One of the points that came up repeatedly that day was that if you weaken your organization by letting go of too many key people, you won't easily be able to replace them when times rebound. Weakening your organization will only make survival more difficult. You need all the help you can get from experienced people who understand business cycles and your customers' needs. Don't forget that your customers are also affected by hard times and you need to provide them with better service than your competitors do if you want to be around to see a recovery.
At that industry roundtable, participants had the comfortable luxury of still enjoying good times as they speculated on past lessons and how to apply them if the economy turned south again. Now, however, that we've entered those deep waters, I'm sure it feels a little different. In the coming months we'll be looking to many of you for strategies and answers and reporting back to the industry what's working and what isn't.
You have to do what you have to do, but keep your trigger finger off that panic button if you can.
