Rental: Rental rates are an important part of the equation for sustained growth in our industry. Do you have a philosophy on how to get and keep rates at a profitable level?
Kneeland: I think everyone has to understand what their cost of capital is. A challenge that our industry faces is it hasn’t been a very good steward of other people’s money. Historically, during almost every downturn we have one or two companies that go into Chapter 11, and that doesn’t bode well for the industry at all; it’s a stain on our industry. We need to understand that if we borrow a dollar, we have to bring something back north of that dollar in order to give a return to the investor. That investor could be the bank, it could be personal, or it could be public debt. It doesn’t matter. We still have to get a return, and that comes down to rates. We can only squeeze so much juice out of the grape of cost. It comes down to “what am I worth?” and this is an industry that goes for cash. That’s okay for the moment, but it’s not sustainable in the longer term.
Rental: The industry is more savvy than it was 10 years ago...
Kneeland: But so are the lenders. When I took out personal loans to start up my business, that gave me religion real quick. I had to make sure I could pay that back. And I had to pay everything else that goes along with it too... the employees, the benefits, etc. We have a tendency to react, “I gotta get the equipment out,” right? Then all of a sudden, it becomes a self-fulfilling prophecy. Sometimes we over-fleet intentionally, but we should really stop and think: Maybe we shouldn’t buy as much and instead, enjoy a higher rate and higher return. I’ve always had this philosophy that you shouldn’t work really hard to lose money.
Rental: Where does the industry need to improve? Where are there opportunities?
Kneeland: We, as an industry, are looked at somewhat as a commodity, so we need to think about how we can differentiate ourselves. Clearly, technology is a game changer. People have accessibility and I do believe that plays a role in what we want to give our customers. Everything’s readily available at everyone’s fingertips. For one, we need to find a better way of doing business and take the commodity out of it. Second, safety. We’re an industry that doesn’t have a very good record on safety. We think we do, but we don’t, and we need to take ownership of that and do better.
I also think we’re in a global economy today. The U.S. is now becoming a big producer of natural gas, and I think over the next decade, we’re going to see more companies come here because of the low cost of energy, which is rather attractive. That’s a likely opportunity. We’re in a great place as an industry, we just need to seize the opportunity.