- Buyer's guide
Rental Market: Riding The Economic Waves
McDonnell said that in April, United Rentals CEO Michael Kneeland commented that the company expects net rental capex for the year to be near zero, or even at a net positive inflow.
"In other words," said McDonnell, "the inflow of money from used equipment sales and the outflow of money spent on purchasing fleet will be at very similar levels. In the first quarter of 2009, our company exceeded its target for used equipment sales. As a result, proceeds from used equipment were $15 million greater than rental capex spent in the quarter. This strategy also reduced the size of our rental fleet, according to plan: our fleet size was at $4 billion of original equipment cost at the end of March, compared with $4.1 billion at the start of the year."
McDonnell said de fleeting is a process that definitely needs constant analysis.
"The ideal," he said, "is to carry enough fleet to address customer demand now and in the near term in any given category, but not carry dead weight over an extended period of time. United Rentals has very robust technology tools in place to analyze equipment utilization by category and class of equipment."
United Rentals does not disclose specific fleet positions on a category level, McDonnell said, but as an indicator in the underground construction market, the company's aggregate fleet level of backhoes, trenchers, excavators, mini excavators and skid steers was lower on a year over year basis in early June, while the trench safety fleet was basically status quo (information is calculated on original equipment cost).
Rays of light
Indeed, trench safety equipment is one bright spot in the rental picture.
"Our current plan is not to de fleet trench safety equipment," McDonnell said. "We are optimistic that the business will improve with the application of stimulus funds and will strengthen over the next five years. In fact, United Rentals is continuing to invest in bringing new products to market, and we also continue to standardize our trench safety fleet across all regions.
“Standardization increases our ability to redeploy underutilized assets to stronger markets where demand is greater. So far this year, trench safety rental rates have been relatively stable on a year over year basis, which has not necessarily been the experience of general construction rental businesses. We are dealing with rate pressure in some markets on a localized basis, but our trench safety footprint overall has not seen a significant decline in rental rates versus 2008."