All over the United States and Canada, manufacturers and equipment distributors saw the trends. End users were renting more and buying less. As rental companies posted bigger margins than they did, manufacturers came to the same realization — we can rent to the end user directly.
The trend is occurring in Mexico too. The owners of Gomez Palacio, Durango-based Joper, a manufacturer of concrete mixers and more than two dozen other light equipment products, saw 25 years ago that they could eliminate one step between manufacturer and end user by renting directly. Joper began its rental division — Maquirent, which now boasts 18 branches — in 1980.
Joper CEO Jorge Perez Jr. recognized more than two decades ago that renting was the perfect solution for Mexican contractors, perhaps even to a greater degree than for their counterparts in the United States.
“The Mexican economy is developing, and renting gives the contractor the opportunity to rent equipment and continue to grow without losing liquidity buying new equipment,” he says. “They typically work on numerous jobs at once and therefore can't have their own equipment on all of them. They can't afford long-term investments because there is so much economic uncertainty and they have to make their payments. And once the job is finished, what do they do with the equipment if the economy slows down? They often can't re-sell it for a good price because they lack maintenance capability.”
Which brings up another reason why rental has great potential in Mexico — the lack of trained mechanics. The cost of finding those mechanics and investing in the tools and facilities needed to repair a variety of machines is time-consuming and cost-prohibitive for most contractors.
“That's the basic issue,” says Perez Jr. “They don't have enough trained people or the transport to move their machines. And in Mexico, we aren't accustomed to give constant service to our equipment. They say: ‘It'll stand up, it'll stand up’ and then it stands up until it dies. People expect too much from the equipment. But we, as a rental company, perform preventive maintenance, we check equipment on the job sites, we send our people to perform service. These are costs contractors often fail to analyze. When we do a cost analysis for them, they see how much these problems cost them and how we can help them.”
The staff of Maquirent — led by Perez' sons Jorge III and Rodrigo (other brother Fernando runs the Joper manufacturing facility) — has actively gone out to convince customers how rentals can save them money. Jorge III conducts breakfast meetings in cities where Maquirent has branches to convince contractors, architects, engineers and plant superintendents that rental is the most economic way of meeting their equipment requirements.
“We do a cost study and I tell them openly, if you're going to use the equipment for a certain period of time, rent it, but if you're using it for a longer period, buy it,” Jorge III says. “What convinces them are the numbers. We explain the costs of repair and transport and how we can save them. We tell them don't just believe us because we say it, look at the numbers. With just a small amount of capital they can get all their work done by renting, without having to come up with capital in a country where credit is difficult to obtain.”
Jorge III explains that many contractors don't rent simply because they haven't been exposed to the concept and haven't dealt with a reliable rental company. When he explains all the services Maquirent offers, people are often surprised, not having realized that this type of service exists.
When Jorge Jr. decided to go into the rental business, he reasoned that Maquirent would have a built-in advantage, since as a manufacturer, Joper could supply the needed equipment in large quantities, enabling the rental company to compete with larger, better capitalized foreign firms. Although those rental companies were not on the scene 20 years ago, they are now. Prime Equipment has a significant presence in northern Mexico and Ameco operates in a number of cities. Caterpillar has more than 50 locations in Mexico, the vast majority of which rent equipment.
The lack of any organized association makes it difficult to accurately count the number of rental centers in Mexico, but numbers range from Jorge III's estimate of 1,200 to 1,500 rental centers to as many as 2,500 according to some. Maquirent, with 18 locations spreading from the far north to southern cities such as Oaxaca and Veracruz, is the country's second largest in number of branches and with last year's total volume of U.S. $4.4 million ($2.7 million in rental) Maquirent clearly ranks among the country's rental leaders.
Having always focused on light equipment, Maquirent has recently made its first steps into larger items. It offers booms and scissors in some cities and has a branch specializing in aerials called RentAlto in Torreon. Maquirent has rented Case backhoes for years and earlier this year became a JCB dealer in Mexico. The Maquirent staff has great expectations that the quality of the JCB line and the strong relationship they are developing will mark a dramatic step forward into the heavier equipment arena.
Factory to network
Founded in 1960 by Jorge Perez Sr., Joper is one of Mexico's leading equipment manufacturers. It makes dozens of products, including concrete mixers, gas- and electric-powered concrete vibrators, vibratory rollers, plate compactors, masonary, concrete and asphalt cutters, jackhammers and scaffolding products.
“We complete 180 concrete mixers and 100 scaffolds per week, and can do dozens of vibrators,” says Fernando Perez who runs the manufacturing facility. “We follow the same manufacturing principles as General Motors and we hired engineers from the United States, England and Mexico to teach us. The processes permit us to develop products quickly because we manufacture on a ‘just in time’ basis.”
Fernando and his staff have also become experts in repairing machines that are used in the manufacturing process. “If a machine breaks down, it could stop production for 15 days while we send it abroad to have it fixed,” he says. “So we fix everything ourselves.”
The company's network of distributors — 60 in Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Beliz, Ecuador, Colombia, Puerto Rico, and Texas and Michigan in the United States — also handles Fuji, Wacker, Kohler, Briggs and Stratton, Mitsubishi, Honda and Target products.
Its large distribution network gives Joper the ability to market products over a vast territory. Perez Jr. believes the distribution network gives Joper — and by extension Maquirent — a significant advantage. It's not just that Joper has a lot of distributors — it's that they've all been representing the company a long time.
“Even most of the youngest ones have 20 years representing us,” says Perez Jr. “We have many distributors with us for more than 30 years and six or seven were among the original founders and have 40 years with us. There are new generations of managers, of course, but the relationship is strong because of that history. Our goal is that our distributors put Joper as the preferred brand, along with the other companies that we officially represent.”
Because Joper wants all of its distributors to rent as well as sell equipment, Maquirent doesn't open branches in cities where Joper already has a distributor. “We would be competing against our own distributors and we respect the distributors too much to ever do that,” says Rodrigo Perez.
For the companies that Joper distributes for, it has been successful in gaining credit for two years, or even three in some cases. “There is little credit available in Mexico,” Jorge Jr. says. “One business in 100 gets credit on a national level here but we get it from several banks.”
Jorge Jr. believes the company's strong distribution network will enable it to draw interest from other manufacturers. “We want to bring in other kinds of equipment from abroad,” he says. “We'd like to be a distributor for aerial work platforms and other products. For many manufacturers, the big question is, when they come to Mexico, who do they sell to? What customers can they trust? They can sell, but collecting is another thing. The culture here is very different. You can't just come in here and start selling without knowing who you're doing business with. But we can offer the guarantee.”
The ability to give service is another factor, Jorge Jr. says. “Suppose a contractor from Torreon is working on a project in Oaxaca, far away in the south,” he says. “And a machine breaks down or needs maintenance or parts. We can send them to our distributor or rental location in Oaxaca and guarantee them service. Who else could do that? If it is equipment from the United States or England or Japan, where can they get service? They don't have to send somebody from one of those countries. We can offer that to the manufacturers and we can offer that to our rental customers.
“So our objective is to raise our level of service. You can't ask a contractor to wait a week to repair a concrete mixer. They've got people waiting, they've got workers waiting. You have to give immediate service. So we are developing that ability in our entire network.”
The industrial market
Joper is based in the northern industrial city of Gomez Palacio, part of a tri-city metropolitan area known as La Laguna, even though the dry desert region is not exactly inundated with lakes. Including its sister cities of Torreon and Lerdo, the three-city area has more than a million inhabitants. Torreon is in the state of Coahila, Gomez Palacio and Lerdo are in Durango.
The tri-city area is home to more than 250 factories and maquiladoras, or assembly plants, including such prestigious manufacturers as Sumitomo, Caterpillar, John Deere, Corona and Lincoln Electric. It is also home to a burgeoning textile industry with companies such as Wrangler, Samsung, Hanes and Lee owning large factories. According to the U.S. Department of Commerce, the region has become Mexico's leading producer of textiles (5 million garments per day), milk (1 million gallons per day) and a leader in mineral and food processing as well as auto parts.
While Maquirent has traditionally focused on construction, the growing industrial presence has led to the development of that market, with a steadily increasing demand for industrial maintenance equipment. The firms have created a burgeoning demand for aerial equipment, which has also attracted the attention of Mexican contractors. Maquirent hopes the industrial market will help it to diversify and lessen its dependence on the cyclical construction sector. While Maquirent's revenue at one time was nearly 100 percent construction, about 25 percent of its 2000 revenue came from the industrial market.
The industrial facilities, many of which are foreign-owned, tend to have stricter safety standards than the construction industry, which has led to the growing use of aerial work platforms. Maquirent has also found a growing market for aerial equipment in tourist-oriented cities such as Cabo San Lucas where much maintenance work is done inside luxury hotels.
The Mexican aerial market is, to some degree, virgin territory for Mexican rental companies. Scaffolding has always been an important rental item for Maquirent, which manufactures scaffolding in large quantities. Some of its branches have more than a thousand scaffolding pieces in their inventories. However, just as U.S. contractors did in decades past, Mexican contractors are discovering the efficiency of aerial equipment and the Maquirent staff is performing demonstrations wherever possible. Maquirent is currently working on a distribution deal with a U.S. aerial distributor to further market aerial equipment throughout Mexico in the coming years.
Construction shopping center
Maquirent created a new branch in Torreon that is part of a construction shopping center for contractors. On a roughly 90,000 square-foot piece of land owned by Joper, in a growing area of the city near several industrial parks, Maquirent built a branch and a complex called Construmarket.
Along with the new Maquirent branch, set to open next month, Joper built in a number of storefronts. “All of the stores here will be related to construction,” says Jorge III. “One business selling materials, another cement, another bricks, another tools. This way we share customers and everybody benefits. Each store attracts customers that might also go to the other stores.”
The new Construmarket complex was constructed on the edge of the city where a large belt highway that circles around the three-city area is being built. “The city is expanding in this direction,” Jorge III says. “The downtown area is all built up. This is where all the new growth, including golf courses, residential subdivisions and industrial facilities, is being built. And we'll have everything needed to facilitate those projects.”
The project is typical of Joper and Maquirent, which tends to always be thinking ahead, attempting to be a step ahead of its competition, a step ahead of the trends.
Although the Mexican economy currently is hitting some rough spots, closely dependent and influenced by the U.S. economy as it is, overall the opportunities for rental are clearly growing in Mexico.
Family Values
Joper and its rental company Maquirent are, in the truest sense, family owned. Jorge Perez Jr. and eldest son Fernando run Joper; Jorge III and his brother Rodrigo run Maquirent. Just as most of the distributorships have been with the company from 20 to 40 years, the employees of the office, factory and rental centers also have longevity.
“We've had almost no turnover,” says Jorge Jr. “That has always been our success. Our employees have always had relationships of friendship with us. It's a business, of course, but they do the impossible to sell and rent our equipment because they feel part of the family. That's why so many of the distributors have remained with us, that's why the office staff has remained, and that's why so many of them send their children to work for us. This is a great satisfaction for me.”
The Perez family allows its employees flexible schedules and provides amenities such as an onsite cafeteria with its own cook. Many employees are still in school and Joper allows them to adjust their schedules whenever necessary to be able to attend their classes. Employees often work at night or on weekends if school or family commitments take them away from their offices during the week.
But obviously family values only go so far when it comes to making a living and Joper boosts its employees compensation packages by providing incentives. “There isn't a single activity here that doesn't have its incentives,” says Rodrigo Perez. “Managers have their incentive packages, and salespeople as well. Even secretaries: if there are fewer errors in the information they provide headquarters, they get a bonus. The more machines the mechanics repair, the more they earn. For the drivers, the more machines they deliver and pick up, the more they earn. Even the collections personnel get bonus points. For example, if fewer than 20 percent of their clients take longer than 60 days to pay, they get points. Even the receptionist who answers the phone can get compensated for making sales. And each branch earns points for volume, for collection, for everything.”
The premiums are clearly articulated, Rodrigo says, so that each employee knows exactly what his or her goals are as well as those of their branch. As a result, the Joper and Maquirent facilities tend to be filled with committed workers who pull together for the common good as well as their own paychecks.
An RER Capsule
Maquirent
Gomez Palacio, Durango, Mexico
History: In 1960 Jorge Perez Valdez founded Joper S.A., a manufacturing company that began with concrete mixers and now has more than 30 products including concrete mixers, gas- and electric-powered concrete vibrators, vibratory rollers, plate compactors, masonary, concrete and asphalt cutters, jackhammers and scaffolding products. Joper also has a casting plant that manufactures parts for construction equipment. It founded a wrought-iron furniture plant in 1992, Turbulares Mexicanos Industriales.
Jorge Perez Rodriguez (Jorge Perez Jr.) became CEO in 1973 and has run the company ever since. His son Fernando Perez is Joper's general manager.
Perez Jr. began rental company Maquirent in 1980. Now with 18 branches, sons Jorge Perez Garza (Jorge Perez III) and Rodrigo Perez are general managers of Maquirent.
Branches: Jopes has more than 60 distributors in Mexico, and has distributorships in Guatemala, Costa Rica, Honduras, Nicaragua, Panama, El Salvador, Beliz, Venezuela, Ecuador, Puerto Rico and the U.S. states of Texas and Michigan.
Maquirent has branches in Aguascalientes, Cabo San Lucas, Chihuahua, Durango, Gomez Palacio, Hermosillo, La Paz, Mazatlan, Oaxaca, Pachuca, Poza Rica, Queretaro, Saltillo, San Luis Potosi, Torreon, Veracruz and Xalapa.
Volume: 2000 rental volume, Maquirent: U.S. $2.7 million
2000 sales volume, Maquirent: $1.7 million
2000 sales, Joper: $7 million
