John Paz talks to Murray Pollok about renting pumps in North America.
28 September 2010
Godwin Pumps is known worldwide for its Dri-Prime pumps manufactured in the UK, but the company also runs a massive pump rental business in the US. Murray Pollok spoke to John Paz, Godwin's president.
Godwin Pumps is this year celebrating the 40th anniversary of the introduction of its first Dri-Prime automatic priming pumps. It might equally be celebrating the decision in 1976 to establish a pump rental business in the US, because in today's difficult sales climate it is the rental company that is making a massive contribution to the success of the group.
John Paz, president of Bridgeport, New Jersey-based Godwin Pumps, took on the running of the rental division straight from college at the request of his father, John Paz Sr. It was the father, then running a heavy-equipment construction business with his brothers in New Jersey and Pennsylvania, who first spotted the potential of the Dri-Primes (being built in the UK by Godwin Pumps) as an alternative to the less reliable manually primed pumps that he was using on dewatering projects.
Speaking to IRN on the phone from the New Jersey office during the Rental Show in Orlando - heavy snow having prevented him making the trip to Florida in the company jet - Mr Paz remembers that his father was focused on selling the Dri-Prime pumps in North America and that he originally wanted to sell off the rental rights. "I said, ‘Dad, the only cheques coming in are for pump rentals'."
That realisation - and the fact that breaking a new brand and technology was always likely to be easier through rental rather than sales - is what drove the development of the rental business in the US, called Godwin Pumps of America.
"We started building our rental fleet", says Mr Paz, "and we became quite successful. At that time rental itself was growing anyway, but we cut the path in pumps." He recalls that in those days many contractors simply borrowed pumps from each other, so a professional rental service was welcomed.
A lot has changed since then. By the late 90s the North American dealership had become Godwin Pumps' largest distributor worldwide, and in 2001 John Paz acquired the UK manufacturing business, transforming his company into a global pump manufacturing and sales business, albeit one with a major domestic rental operation.
That business model - pump manufacturing in the UK (at the historical Godwin site in Quenington, Gloucestershire), sales worldwide through distributors, and rental in the US - remains in place today. Now, however, the rental business has assumed a pretty remarkable scale, with annual revenues in the region of US$100-150 million.
Although Godwin has a sales network in North America of over 100 locations, the rental business comprises 25 dedicated rental centres with a rental fleet of 4000 diesel driven pumps - including 800 ‘workhorse' 6 inch pumps alone - and a total fleet of 10000 units including associated submersible pumps, lighting towers, gensets and compressors are also included.
"We arguably have the largest diesel pump fleet in the world", says Mr Paz, who clearly lives and breathes his business.
His strategy has been to gradually add locations. The majority of the rental network is on the east coast, with just four depots in the west and three in Texas. The latest to open was Jacksonville, Florida - adding to the existing Lakeland, Florida site - and a 26th, in Evanston, Wyoming, close to Salt Lake City, will open early this year, helping to expand the operation in the west. Like all the Godwin locations these will be high quality, with 16000 ft 2 of area and typically $12 million worth of equipment.
There is plenty of scope for additional locations in the US, with San Francisco and Minnesota being two of the more obvious gaps, says Mr Paz.
There has been no rapid expansion or investment. "I've taken my time and worked strategically [and opened sites] where we can find good people. We're not in any race", he says, "A lot of people want to be huge. There is a risk in being too big in rental. It's a service business - delivering the right equipment and the right service."
In Godwin's case it is also a very specialist business, requiring not just the ability to sell a rental to a customer but in many cases engineer the job as well. These engineering design services extend to on-site teams who fusion weld polyethylene pipes in sizes up to 18 inches.
Of course, 2009 was a difficult year for Godwin as it was for everyone in the US rental scene. "2009 was the first year in 30 years that we didn't have positive growth", says Mr Paz, who puts the fall in revenues at a little more than 10%. Even so, he says the company remained profitable and there were no lay-offs among the 650 staff.
"We reigned in overtime, cut fuel use, reduced expenses. We did really well", says Mr Paz, "Overtime is a multi-million dollar cost. The stores open from 7.00am to 6.00pm - we cut back the ‘way of life' overtime. If nothing's going on, they punch out at 4.30 pm. There has been a huge amount of cooperation with managers and staff." He puts total annual cost savings last year at between $6 and $10 million.
Like other renters the company gets work when there are natural disasters - the recent severe flooding in California at the end of 2009 being a good example - but Mr Paz says that the general market has seen an improvement since last October. He says business levels have jumped about 25% - time utilisation is back in the 60-70% range - and is now back at pre-recession levels, and stable.
"This is my fourth recession", he tells IRN, "and in the prior three we were always a leading indicator [of recovery]. Half of the upturn is a recovery in the market, and half is us having a very strong focus and pushing in the field to get business. We had to regroup, go back with a different strategy." A slightly more aggressive stance on pricing is one element of this, he acknowledges.
The company has also been helped by the US economic stimulus package. "We've garnered some work from stimulus money, and we will get more", he says, mostly in investment in water and wastewater as well as construction.
If investment in vehicles has been cut, spending on new fleet has been maintained, partly in support of the new depots and partly in response to a demand for larger, more specialised pumps, such as the massive CD500M unit for large dewatering applications in mining and civil construction. This is one of the new pumps that Godwin will exhibit at Bauma (along with the first of a redesigned range of submersible pumps - see our Bauma Guide in this issue).
The company has invested in its IT infrastructure, implementing a Result Group rental software system for its US rental operation that went live in September last year and which Mr Paz says is already proving beneficial. He says being able to generate narrow focus reports - revenues per salesman at each branch, for example - gives him and other managers more control. It's too early to quantify the benefits, he says, "but by instinct I know it's a lot better".
The future focus on the business will be to continue expanding the rental operation, and, as John Paz explains, "We're looking to find ways to use Dri-Prime pumps where they are using different technology." One recent example of this is using Dri-Prime units to replace standby generators at pumping stations. These generators are designed to start-up when power is cut, but the pumps don't always successfully start operating again. The diesel driven Dri-Prime provide the power and the back-up pump in one unit. As many of 60 of these have now been installed in Florida alone.
The focus on the sales operation continues, of course. In the coming years there will be a particular push on expansion in Latin America as well as in the Middle East, Africa and Europe. Godwin's Latin American regional manager Tomas Fernandez, a Venezuelan-born, 15 year veteran with Ingersoll Rand, says Godwin already has representation in Mexico, Panama, Colombia and Chile. "It's a long term effort", says Mr Fernandez.
Who knows how the business will look come the 50th anniversary of the Dri Prime. Whatever the decade holds, expect another well-deserved celebration in 2016 when the rental business reaches its 40th.
=== BOX STORY ===
A depot's story
Managers at Godwin's Lakeland depot east of Tampa in Florida are proud of their status in the company's network, regularly placing in the top two or three in the weekly league table for ‘pumps on rent'.
Lakeland is one of the company's largest depots, with anything from 100 to 200 pumps on rent at any one time, says sales manager Barry O'Brien. Typically around a third of these will be rented for bypassing sewer pipes that are being repaired or re-lined, but the depot's major customer application is dewatering the open cast phosphate mines that litter much of the Florida landscape. Many of these contracts are with mine operator Mosaic.
The Lakeland depot illustrates the capital intensive nature of pump rentals. With around 25 employees, the depot is base for three mobile mechanics, two roll-back trucks, two flatbed trucks, two pick-up trucks and one truck with a loader crane. A four-bay workshop - including a paint booth - has sufficient crane capacity to handle even the largest pumps. The shop carried $300-400000 worth of parts at any one time, including shafts and impellers.
This depot, like the others in the network, is very self-contained. Mr O'Brien estimates that around 80% of the engineering on its contracts are done in Lakeland, and the depot carries out its own marketing, payroll and billing functions.