NASHVILLE, TN – The key to survival for dealers in a world of slowing freight and plummeting truck sales can be summed up in one simple word, according to W.M. “Rusty” Rush: differentiation.
As president & CEO of Rush Enterprises, which owns Rush Truck Centers, one of the largest Peterbilt dealership chains in North America, Rush has focused on differentiation as a corporate strategy for many years and expects it will help his family’s business survive the current downturn.
“We’re dealing with tough times,” Rush explained in a roundtable discussion with reporters here at Rush Enterprises 3rd annual technician skills rodeo. “Anytime you have sales of new heavy-duty trucks drop from 285,000 units to 137,000 in a year – with some projecting just 120,000 units to be sold in 2009 – it’s obvious the landscape is changing. The expected pre-buy for 2009 is not going to happen with the economy the way it is. So we make readjustments.”
Rush believes differentiating the company’s truck sales efforts to focus on multiple segments – vocational, on-highway, small fleet, larger fleet, owner-operator, etc. – rather than just one or two will help Rush Truck Centers weather the downturn.
“About 40% of our business is in vocational segments – construction, oil and gas, and especially refuse, which is the best segment going forward right now,” he said. “We’re about 20 to 25% with large fleets, 15 to 20% with owner-operators, and 15 to 20% with small, medium, and private fleets operating 50 to 100 trucks. The small and medium-sized operators have suffered the most so far.”
Selling to a variety of customers across many segments helps build stability for the company, Rush noted. The same differentiation philosophy also applies in the trenches, putting equal emphasis on parts, service, sales and body shop work at each of Rush Enterprises 48 truck centers across the U.S.
“Look, if fleets decide to keep their trucks longer in the face of this downturn, they’ll need parts and service to keep them going,” Rush said. “At some point, though, they’ll have to replace those older trucks – whether the freight market rebounds strongly or not. You can only put off replacing trucks so long.”
Marvin Rush, chairman & founder of Rush Enterprises, added that such differentiation isn’t possible for smaller dealers that lack the capital needed to keep abreast of the technology and tools needed to keep today’s electronically-packed trucks rolling.
“Twenty years ago it would take $30,000 to outfit a small shop – now it takes $500,000, and a big shop will require $2 million,” he said. “But it also used to be that you generated most of your gross profits from truck sales. Now you’re doing it with parts and service – and that’s why you need those kinds of investments.”