SAN ANTONIO, TX. W.M. "Rusty" Rush, chairman, CEO and president of Rush Enterprises, expects Class 8 truck sales to follow a moderate path in 2014, a path he hopes to offset, however, through expanded parts and service growth via the significantly expanded footprint of the company’s Rush Truck Centers (RTC).
“Look at my margins and it becomes very clear that parts and service is way better than truck sales; by six fold,” he told reporters here during a news conference here at the 2013 RTC Technician Skills Rodeo.
“Ten years ago parts and service represented 40% of our gross profit; now it represents 60%. But that comes from continued investment and in more facilities,” Rush added. “So while you don’t mind selling a truck, to successfully service trucks takes a far larger investment.”
Rush added that while he thinks Class 8 retail sales in the U.S. to range between 185,000 to 210,000 units in 2014, he expects the lion’s share of the company’s growth to come from the expanded parts and service side of the business.
That “expansion” occurred at a rapid pace starting this year and, once a final acquisition is wrapped up by mid-January 2014, should leave RTC with a total of 108 facilities across 20 states – with most of the additions resulting from the purchase of dealerships selling Navistar trucks and engines.
Those acquisitions include:
- Midwest Truck Sales, with locations in St. Louis and St. Peters, MO, and Olathe, KS. The Missouri dealerships offer truck sales, parts and service for International trucks and the Kansas location provides truck sales, parts and service capabilities for Hino and Isuzu trucks and parts and service support for Mitsubishi Fuso trucks.
- TransAuthority, which operates full service International dealerships in Richmond and Suffolk, VA, plus parts and service locations in Fredericksburg and Chester, VA. Those two acquisitions also expanded Rush Truck Leasing's capabilities with Idealease franchises in St. Peters, MO and Richmond and Norfolk, VA.
- Prairie International, which operates International commercial truck dealerships in Champaign, Decatur, Bloomington, Quincy and Springfield, IL, plus a collision center in Champaign, IL, along with Idealease commercial lease and rental operations at the dealerships in Champaign, Decatur, Quincy and Springfield, IL. The acquisition is expected to close this month.
- Agreements to purchase certain assets of CIT, Inc., which does business as Chicago International Trucks, Mcgrenho L.L.C., which does business as Indy Truck Sales, and Indiana Mack Leasing, LLC; and the membership interests of Idealease of Chicago, LLC. The acquisition includes International commercial truck dealerships and Idealease commercial vehicle leasing and rental operations in Carol Stream, Chicago, Grayslake, Huntley, Joliet, Kankakee and Ottawa, IL, and Brazil, Gary and Indianapolis, IN – a deal expected to close in January 2014.
“Altogether we’ve added about $1 billion in revenue this year and 1,500 employees; that’s a lot,” Rush said. “So the whole focus for the next 18 months is to integrate all these new facilities into our culture.”
To that end, Rush said his company is speeding up implementation of long-planned business management system. Representing some $50 million in cost and seven years of development, the company is accelerating its implementation date to March 2015 from the summer of 2016.
“It will cost us a little bit more but it’s the right thing to do,” Rush said. “We can’t operate a network of stores this large consistently and efficiently without a business management system like the one we’re developing; it will be a differentiator for us.”
Rush also established a centralized recruiting department six months ago mainly to help beef up the ranks of its technicians, which will number close to 2,000 once all of its recent acquisitions are fully completed.
“Look, consistency is what people want, in life as well as in business,” Rush explained. “In three or four years, selling trucks won’t be about sticker prices; it will be about business pressure points and how we help the customer maximize uptime. If we can keep a truck up and running 29.2 days out of month versus a competitor’s 28.5 days per month, that 7/10ths of a day per month makes a huge difference in life cycle cost and will be what sets us apart.”
Rush also expects to continue investing in and expanding the company’s network of Navistar dealerships down the road as well.
“There’s been no question that they [Navistar] suffered some serious impact given their decision to follow and alternate [emission] path from everyone else,” he said. “While I definitely think they are on the right path now after adopting SCR, we are still in the middle of them working through all this; you can’t just throw a light switch and it’s all fixed.
"But that hasn’t dampened my enthusiasm [for Navistar] because we’re not a short-term player in this market," he added.
The growth of the company’s Navistar network also complements other facets of RTC’s business, Rush said.
“Look, 50% of the Peterbilts we sell are vocational models but almost all the Navistars we sell are freight trucks,” he continued. “There’s also far less competition with the Peterbilt side of the business as they serve distinct geographic areas.
"But Navistar trucks come equipped with Cummins engines, Eaton transmissions, and other components we already handle in our network," Rush pointed out, "so now we’ve also expanded the service network for our existing customers as well. And that we hope will help us continue to drive more revenue growth.”