Holt Cat drops allied equipment rentals: Market reality; Cat rental stores folded back into dealership as Texas distributor streamlines rent-to-rent biz - Industry News

Diesel Progress North American Edition, July, 2003 by Mike Osenga

In a move reflecting the market realities of the equipment rental industry today, Halt Cat, the San Antonio, Texas, Caterpillar equipment and engine distributor, announced plans to streamline its rental business by closing or merging a number of its Cat Rental Store operations. Holt also said it will drop most of the non-Cat built "allied equipment" lines from its rental fleets.

The reason given for these changes is to focus on what Holt considers its core areas of earthmoving, excavation and compaction equipment. According to Holt's announcement, this was a strategic business decision that will also allow the company to offer a larger volume of Caterpillar machines and related products.

"When we created a separate company in 1996 to handle the rental of small to midsized Cat and allied equipment, we did so because industry experts said that separation was necessary to get the proper focus on the rent-to-rent business," said Allyn Archer, president and COO of Holt Cat. "After seven years in the trenches of rental wars, we have decided that the best way to serve our customers is by focusing on our core competencies -- rental, sales, and service of heavy equipment.

"We will transition out of many of the allied equipment lines that we have offered for rent, retaining only those that are commonly demanded by our customers to compliment Cat equipment."

While this move by Halt represents the current realities of making money in equipment rental today, it also represents the first public "break" from the Cat Rental Store business model.

The Cat Rental Store concept revolves around a dealer-based network of stores offering Caterpillar-built off-highway equipment. The rental fleet is filled out by other "allied" machines not manufactured by Cat, but often supplied to Cat requirements. Allied equipment manufacturers have been strongly encouraged to provide machines powered by Cat or Perkins diesel engines, and more recently other Caterpillar-built components, for Cat Rental Store fleets.

Per Archer's comments, the requirement to establish rental operations completely separate from the dealerships stores was a major concern. Not only does this involve separate and often new buildings, but separate staffs and information systems dedicated to the rent-to-rent business. The bottom line, in this somewhat surprising announcement from Holt Cat, was that the company did not feel it could be profitable renting equipment this way.

Howard D. Hicks, vice president marketing for Holt Cat, said the company was evaluating its allied equipment lines and would likely retain some equipment that was complimentary to the Cat-built machines. He mentioned water trucks as one likely allied line to be retained and said that the profitability of renting small portable gen-sets, air compressors, trenchers and other machines was currently being evaluated. Only aerial lifts, the most commonly rented type of off-highway equipment, was definitely out of the allied equipment fleet, Hicks said.

"We are very committed to the rental business for Caterpillar equipment," Hick said. "However, our profit is in our core earthmoving equipment versus trying to be all things to all people."

Holt Cat Rental will retain its 14 rental representatives, a group Hicks said will have access to more Cat machines now that the rental operation has been merged.

Holt Cat is also in the process of establishing rental offices in its Corpus Christi, Longview and Irving full service stores. Stores in Waco, Austin and North Dallas will be upgraded to add more service and parts, while the Cat Rental Stores in Ft. Worth, San Antonio and Weslaco, Texas will be folded back into the local full service operation. In all cases, Hicks said, the Cat Rental Store signage will be retained.

Holt Cat, which acquired Darr Equipment Co. in April 2002, sells and services Caterpillar machines and engines in a 118-county Texas territory spanning from the Red River to the Rio Grande. Holt also offers machine rebuild capabilities, sells used equipment, and operates an international pipeline equipment company.

Holt also fabricates its own line of land clearing equipment and Halt Spray King water tankers. Like many engine and equipment distributors, Holt Cat also has its own power generation rental business, as well as an oil and gas compression rental fleet, separate from the Cat Rental Store network.