Smaller equipment, such as generators, and top brands help Herc Rentals’ bottom line. – Robert Sciarrino
The customers started coming in before the snow even started coming down.
Light towers, skid-steers and telehandlers were flying out of the location in Fairfield.
Heaters and generators were being picked up in Newark.
Pickups and dump trucks were being delivered out of South Hackensack.
A nor’easter that ravaged North Jersey at the start of the month provided real-time examples of how Herc Rentals, the new name for the former Hertz Equipment Rental Co., is starting to regain its prominence in the fast-growing equipment rental space fewer than two years since it spun off from its more famous parent company, Hertz.
“The entire New Jersey team stepped up and got it done; it’s just what they do,” Rob Cowing, Northeast region vice president, said.
Cowing said the company did double its normal business — and not all of it came out of its facilities. For this storm, Herc Rentals had deliveries of equipment going out to clients ahead of time.
In addition, the company helped set up tent camps — one at the Sussex County Fairgrounds, another at the Livingston Mall — for residents who were without electricity and the out-of-town workers who came to help restore power.
Herc Rentals provided all the equipment needed, including lights and heat and the generators needed to power them.
“We powered everything,” Cowing said.
It’s all part of a turnaround at the company.
Herc Rentals, no longer held back by leadership that did not consider it a priority, is taking advantage of the vision laid forth by CEO Larry Silber, who took over in the summer of 2015.
Higher-quality equipment … and more of it.
More employees … and better incentives to produce.
A wider range of products … serving a larger number of sectors and customers.
Silber, a veteran of the industry, said he has not been surprised by the turnaround.
One of his first moves was to hire industry veteran Bruce Dressel as the chief operating officer. Together, the two have implemented moves that have brought stability and energy to the company.
“When you invest in the product and invest in the people working there, you get good results,” he said.
Wall Street has taken notice.
The stock, which opened at $33 on the company’s launch July 1, 2016, has been regularly trading over $70.
Silber is confident the company’s growth will continue its upward trend.
“We’re in Year 3 of a five-year plan,” he said.
It’s a plan few would have bet on just a few years ago.
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Billionaire investor Carl Icahn began taking an interest in the underperforming Hertz Global Holdings in the summer of 2014.
He quickly became its biggest investor. Icahn now controls approximately 4.5 million shares, or about 16 percent of the company’s outstanding shares, because he feels Hertz ultimately will benefit from changing transportation habits as the next generation embraces ride-sharing over car ownership.
Icahn felt the car rental company and the equipment rental company would be better off as separate units.
One plus one equals three, is the way Silber describes it.
The decision ultimately gave Herc Rentals a chance to thrive. Silber jumped at the opportunity.
Silber was intimately familiar with the unit, having worked with it — and across from it — for decades as an executive at Ingersoll-Rand in Woodcliff Lake.
“It was the gold standard,” he said.
But that was no longer the case when he arrived in the summer of 2015.
Silber was stunned by what he found.
Morale was down. And that was with the employees who remained. Many left during a “brain drain” that followed the company’s announced move from Park Ridge to Estero, Florida, in 2013.
Equipment was of low quality — and much of it was in a state of disrepair that prevented it from even being rented. The focus was on the national accounts that had given the unit stability for 50 years, but even those were starting to lose traction.
The unit had fallen to No. 3 in an industry that often consolidates at the top two performers.
Silber quickly made changes.
(READ MORE from ROI-NJ about Herc Rentals’ workers and unions.)
The sales force not only was increased by nearly 50 percent, but salespeople were given territories instead of products to offer.
Silber then upgraded the equipment, buying products from only the top-shelf manufacturers that workers in the New Jersey market need.
Mostly, Silber gave the company a new direction.
“The company had stagnated in the market,” he said. “It had been overtaken by a couple of its now-larger competitors and the people in the business didn’t have confidence to go out and attract new business.
“The business became heavily dependent and heavily weighted on national accounts.”
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Wanting new customers and having the ability to attract new customers are two different things.
After Herc updated its staff and best practices, Silber worked to expand its offerings.
Large machinery, such as wheel loaders, excavators and articulating off-road dump trucks, that was rented to national accounts brought steady revenue, but not steady growth.
Silber introduced two new categories: Contractor Tools (individual pieces of equipment a contractor may pick up to complete a specific job, such as a specialty saw or drill) and Pro Solutions (numerous products that together solve a problem, such as a temporary need for heating, cooling or remediation products for when a pipe bursts).
“We added those two categories to our existing fleet to broaden it,” Silber said. “And then, at the same time, we weeded out some of the depth of the lower-return items that we had in the fleet and began to eliminate products that were not providing an acceptable rate of return.”
At first, employees were skeptical.
But after the new products began flying out of the company’s five New Jersey locations, they found the business model worked.
While the revenue from the smaller equipment was smaller, the high volume — and the high margins that went with it — made it a stunning success.
Cowing, an industry veteran of 24 years, quickly became a believer.
“We have a little something for everybody now,” he said. “Some of it will be items that we’ll rent once or twice, but now we always can say, ‘Yes, we carry that.’
“You’ll be surprised by who will come in and say, ‘I didn’t realize you had chain saws.’ ”
Or forklifts.
Or mini-backhoes.
“When the mini-backhoes first came in, the staff laughed,” Cowing said. “Now, I can’t keep them. People will come in all day long and pick them up.”
Herc Rentals recently purchased large amounts of flooring equipment. It took more than a year for the market to realize it could get the gear from Herc Rentals, but once it did, Cowing said, the company can’t keep it at its locations.
For Cowing, this represents one of the bigger differences between Hertz and Herc Rentals.
“The old company would have never been willing to buy something and hold it for a year until the market for it developed,” he said.
This ability, Cowing said, has led to fast growth in New Jersey.
A contractor looking for a core drill may also pick up a pipe snake with a camera, he said. And the contractor not only will return on his next job, he’ll tell others about Herc Rentals, too.
Herc Rentals has seen double-digit growth year to year on pro contractor tools and pro solutions at its New Jersey locations.
“And this is all been from word of mouth,” Cowing said.
Both in contractors telling other contractors and the increased sales staff flooding the market.
“That’s what we do all day, we visit work sites and offices to let people know we now have more of what they need,” Cowing said. “Larry always tells the team were a B2B industry, and that means belly to belly.”
Cowing feels the payoff will come down the line.
“If you’re new, you won’t get much business at the start, because you need to be there at the planning stage and build relationships,” he said. “But that’s the amazing thing about our growth, we know more is coming because our salespeople are making the connections they need to make to get in early on the next project.”
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Herc Rental’s growth plan in New Jersey involves more than just the addition of the Contractor Tools and Pro Solutions lines.
Its locations are being reorganized to better serve more sectors.
The Hackensack location handles truck and van rentals.
Silber feels Herc Rentals is positioned to take advantage of the growing need for e-commerce delivery, most of which is handled by third-party logistics companies that constantly need to rent vans to keep up with the growing demand.
The Newark location handles all of the aerial and telehandler business. This ranges from small scissor lifts, large boom lifts that go up to 185 feet and products that can fit through a door but then go nearly 100 feet up.
Newark also will handle what the company expects will be a growing presence in the entertainment business — both in New Jersey and New York.
Then there are additional products, such as 20- and 40-foot containers.
Cowing said they go out as soon as they come in — and they never come back.
“The average rental is almost two years,” he said.
Herc Rentals has more than 235 branches in 39 states across the country. Few are identified as centers of excellence for new initiatives. New Jersey offices, Cowing said, are selected every time.
The aerial-only office is one of just a handful in the company. The Newark office has been selected as one to make a bigger play in the airport industry. New Jersey also is a center of excellence for climate remediation and industrial forklifts.
“Anything that the company does strategically, New Jersey is always on the list,” Cowing said. “I don’t even have to raise my hand, it’s automatically included.
“Larry and Bruce have a gold star wrapped around this area. It seems any investment we do, we do here first.”
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More investment and more growth are coming, Silber said.
“We are still considered a broad-based equipment rental company where we have a tremendous ability around the basic industries: petrochemical, oil and gas, commercial manufacturing and warehousing. It’s commercial facilities, which also involves health care, hospitality, education and recreation.
“We also have excellent representation and coverage in the pharma industry and the food processing and beverage areas. And we do very well in areas where there is agriculture.”
Silber is looking to add to this.
Infrastructure, he said, has been targeted for growth.
“Large engineered products, government-related projects, whether it’s Army Corps of Engineers-type things, or highways and bridges, railways, mass transit and utilities and sewer and market areas,” he said.
Silber was thrilled the company got in at the start of the Hudson Yards project in New York City.
“We got in literally on the sub-ground floor,” he said. “We’re the only rental company that has an on-site facility at Hudson Yards and we have been there since before they broke ground.
“We’re helping with everything from equipment on the ground, to power generation, to the contractors that are installing glass. We’re doing just about every type of activity.”
Silber is hopeful the company can provide the same service to the Gateway Project.
And growth, Silber said, is not just limited to sectors. The company is targeting areas, too.
“One of our major strategies is developing our coverage area around urban markets,” he said. “We believe activity in urban markets will continue at a fairly steady pace.
“We’re focused on the contractors that support those markets, like electrical contractors, facility maintenance, major elevator maintenance companies, remediation and environmental contractors. Any kind of HVAC contractor that supplies commercial and residential, temporary heating, cooling and power is pretty important to us.”
Actually, Silber said, all sectors have a place at Herc Rentals.
“We don’t shy away from anybody who has a need,” he said. “We’re constantly looking for new opportunities to service new customer bases that may not have been traditional to this business.
“We feel we can leverage our footprint, our capabilities and our industry knowledge to cover just about any type of major industrial complex.”
Just like Hertz used to, Silber said.
“We have been able to resurrect some best practices, correct some wrong practices and begin to put an operating model and an approach to the business around diversifying the fleet, attracting new customers and improving and investing in our facilities and our people,” he said. “Ultimately, we want to show that we can service our customers on an equal to or better basis than our competitors.
“We need to demonstrate that this business, which was once considered the gold standard in this industry, can regain its prominence as one of the world leaders in the equipment rental space.”
What’s in a name?
Hertz to Herc may sound confusing, but it makes sense in the equipment rental space. Why? “Herc” is what Herc Rentals was known as for the 50-plus years it operated under the Hertz brand as Hertz Equipment Rental Co.
Larry Silber, named CEO in the summer of 2015, pushed for the Herc Rentals name when the company spun off as its own public company a year later.
“We went through some processes and did a number of things to check the branding and, ultimately, we decided on the name,” he said. “We wanted to keep the old color and style of the writing, so we didn’t transition too far away in the spinoff.
“Fortunately, with the help of Paul Dickard and his communications team and some outside help we had on launching the name, we got great industry recognition almost out of the box. That made it very easy for the name to take hold.
“Social media and other modern-day tools helped us ramp this up pretty quickly and gain acceptance of the name.”
Conversation Starter
Reach Paul Dickard at: pdickard@hercrentals.com or 239-301-1214.
