Ode to spring - and leasing - Financial Guide to Equipment Leasing

Railway Age, June, 1992 by Anthony D. Kruglinski

The days are getting longer. The weather is getting warmer. And the first robin is in residence. Sure signs of spring. Right? Perhaps. On the other hand, we know it's spring when America's leasing sales force dusts off their golf clubs for the first round of client golf outings! These boys (and girls) of summer are already showing the first signs of the tans that are an occupational hazard when it comes to doing rail equipment leasing business. Are we criticizing the concept of client entertainment off premises? Absolutely not. The friendships and mutual understandings that can be developed on a golf course, or anywhere out of the office, can often prove crucial to doing good business. It's just that as America's business climate continues to evolve, client time and availability starts come at a premium. Railroaders wearing several hats as a result of staff cuts may have trouble finding extra time to put on a golf cap. Yet the "client service" aspects of leasing must carry on.

What's the answer? We think it might be developing a sharper business focus before those increasingly more difficult to arrange off-site business outings take place.

Here's what we mean. We've noticed that some of the most successful, growing leasing businesses are developing "personalities" that can distinguish the company or, perhaps, just the salesperson, from the crowd. For instance, we recently received a call from a small railroad looking for a source of mill gons. I began to respond by saying, "Have you called . . ." but was interrupted by the caller who said, "Yes, I've already called The David J. Joseph Company." Which was exactly what I was going to suggest. This Cincinnati operating lessor has developed a reputation as a specialist in coal and steel industry equipment.

Another example might be CitiRail, Citicorp's entrant into the railcar operating leasing derby. While they field a wide variety of equipment, they've developed a particular reputation for being able to skillfully create programs that involve railcars and the financial muscle to rebuild or reconfigure the equipment as a component of a long term leasing transaction. Looking for woodchip cars, 100 ton boxcars or flatcars for forest product service? Call Wilds Pierce and Railcar Ltd. Covered hopper cars? Chicago Freight Car. Boxcar rebuilding programs? Garvey Grain's InteRail subsidiary. Tank cars? Union Tank Car and GATC. Intermodal equipment? TTX Co. Help with coal car issues? Chicago's Residco. Lawrence Beal's National Railway Equipment can provide leased motive power in almost any configuration and in almost any condition.

It could be argued that some of the operating lessors above specialize because they're relatively small and don't have the time or resources to be all things to all people. We'd agree, but so what? The market is looking at these companie as niche players.

What does this say about the future prospects for America's Mega-Lessors? General Electric Railcar Services, GATX/GATC, Union Tank Car and U.S. Leasing? We think it says that size and market presence alone aren't enough. For instance, if our guess is right, having the best selection of boxcars may be less important in certain circumstances than having the best boxcar fleet. Being a well capitalized generalist with significant market share on a number of railcar types will - we think - need to be married with customer sales strategies focused on particular railcar markets. Most lessors which have chosen to lease both railcars and locomotives already have separate sales forces to deploy each. We predict even more specialization in the future to meet increasingly refined market needs.

We also predict that railroad lessees will develop a more complete understanding of why a lessor's investment in new or rebuilt equipment for lease must be accompanied by higher rent payments. What will force this change of lessee minds? The need to grow the "Top" line by developing new customers and holding on to old ones.