If anyone understands the ins and outs and ups and downs of forklifts, it’s William P. Heston. From the nuts and bolts of the different equipment classes on the manufacturing side to the individualized and sometimes complex financing needs on the end-user side, Heston began his career in 1983 — a time when the U.S. was in the throes of what’s been called the Reagan Recession. Armed with a dual degree in business management and economics, the Widener University graduate set out to find suitable employment. Given the state of things, Heston took the sales route. “My first choice was going to be economics,” Heston recalls, “but the recession hit and I was offered a job at Westinghouse Credit.” From televisions and appliances, Heston moved to CIT where he had his first taste of financing materials handling equipment, and eventually went on to CitiCapital. Within the first six months of his 18-year tenure at CitiCapital, he was assigned to a new materials handling division.
Heston explains, “Construction was in the dumps and CitiCapital was starting this division out of South Bend, IN with many of the people who had come from Clark Credit. At that time, Clark owned 50% of the market and they needed more presence. So I was one of three individuals Citi brought over to materials handing from the construction side. It was pure materials handing and once I got a taste of that, I was hooked … it was a perfect fit. CitiCapital did a great job in the wholesale market as well as on the retail side.”
An Independent Leasing Company Seizes the Moment
Enter First Financial Corporate Services, Inc. (FFCSI), the Placentia, CA-based equipment leasing company that ranked #14 in this year’s Monitor Top Private Independents and #98 in the Monitor 100. In July of this year, FFCSI apparently shared the view of the Materials Handling Equipment Distributors Association, which forecasts a recovery for the industry it serves. More to the point, the company announced the formation of its Materials Handling Solutions unit with Heston to head up FFCSI’s national sales efforts it that sector.
In both Monitor rankings, the leasing company that posted $89 million in net assets at year-end 2009, listed materials handling equipment as its third largest asset class. So, what is it that’s new here? Heston answers simply, “First Financial’s philosophy and approach to the market. When we began talks, we agreed that there are very few competitors in the market we’re focusing on. The banks have pretty much abandoned their customers when it comes to providing financing to retail customers and that left a niche … a niche that First Financial can serve.
“You had CitiCapital and GE exit the market and Wells Fargo and De Lage Landen are focusing on their manufacturer programs … so nobody is focusing on end-users directly. That’s where our niche comes in. For the most part, we don’t compete against DLL and Wells Fargo … we’re competing against local banks and other outside sources.” Heston notes that FFCSI has already garnered a reputation in meeting the materials handling needs of these end-users through existing relationships. With the creation of the new unit, First Financial has now intensified efforts to both orient manufacturers to the company’s abilities and pursue new end-user opportunities.
It is in this way that Heston brings a great deal of value to his new employer. “At CitiCapital, we worked all sides of the business … on the wholesale side, I was writing recommendations. I can analyze the short-term rental fleets and say which trucks they need to move and which ones they should stay with. We were able to review the businesses and their practices. It was a total relationship. Today, when manufacturers bring me in or if we go directly to an end-user, I can understand where they are coming from. If there’s a local dealer involved, I can explain things like full maintenance and what that entails to the end-users … that can get confusing for an end-user and they like the fact that at First Financial, we can offer one-stop shopping where we can bill and collect for the maintenance on behalf of the distributor.
“My point is, I understand the materials handling market end-to-end and all facets of it — the dealers’ side, the manufacturers’ side and the end-users’ side. I also understand the program business because I put programs together for Citi. But for the most part, I’m one of the very few people out there that’s doing retail these days … most have moved on to other business.”
A Breath of Fresh Air
It goes without saying that Heston’s relationship with First Financial is far from one-sided. He’s quick to credit First Financial’s executives Richard Stebbins and Tom Slevin for launching the materials handling unit at what he marks as the beginning of an upward curve. “Whenever we have a recessionary period,” he explains, “the businesses that jumped in at the peak are the first ones to get out because they get burned. Both Richard and Tom saw that no one was really in the market because that’s what their customers were telling them. So, they’ve both given me 100% backing and that makes it very easy to gain new business. This company’s flexibility is unbelievable … it’s really a breath of fresh air.”
And, Heston says, the air is about to get fresher. “I do see signs of things improving, and companies have held on to these trucks for eight, ten and, in some cases, 15 years. Those units were never meant to last that long. I have a strong feeling that we’ll start seeing an uptick as companies begin to hire back employees and address their equipment needs.” Heston concedes that some will ride out the November elections to see which party takes the House, but others simply can’t wait. He explains, “If you need the equipment, you need the equipment. The signs are all there, the manufacturers are selling more, the dealers are improving their balance sheets and all those are good signs that things are going to improve in this business.”
In Heston’s estimation, all this bodes well for leasing. He says, “It’s all a matter of allocation on the books and I don’t think that §179 [of the Small Jobs and Credit Act] will affect leasing adversely. If the Act is cancelled, then people will move more toward leasing their forklifts because they can’t take the benefit of depreciation. It will all come down to whether or not a company wants to tap into their cash. So again, I think leasing is going to improve and increase next year. I expect greater demand for it.
“My job,” he adds, “is to train them on how leasing could benefit them. We’re partners in this and we bring a long-term approach. We’re here to inform and guide them. That’s why we sign in person … all this adds value, and that’s what you need in the marketplace.”
If the strategy plays out, Heston explains, the leasing company will expand its presence in the materials handling space by adding a West Coast representative in the coming year. Until such time, Heston and the 16 other originators, who specialize in other fields, will work with one another to both refer new business and to cover closings for one another on an as-needed basis. Working westward, the company maintains offices in San Francisco, Los Angeles, Chicago, Philadelphia and New York, and this presence in key markets works well.
Heston, who spoke to us from his home office outside of Philadelphia, tempers his enthusiasm with a dose of reality. “As for the manufacturers, I think that there are too many players out there in the market. The levels aren’t there to support all of them. You’ll see some consolidations and mergers and other manufacturers that don’t have a full product line and can’t compete in all classes … I think we’ll see them acquired and phased out, or exit the U.S. market.
“But I’ve talked to the OEMs and they are seeing improvement, but they aren’t out of the woods by far … they still need a lot more trucks to keep them going and they also need the parts. That’s where the profitability is for both the dealers and manufacturers … in the parts and the need to increase those sales as well.”
Deftly explaining the economic progression toward recovery, he adds, “So, at the beginning, you’re going to see parts and service increase and then you’ll see the rentals increase. And after they repair the trucks sitting in the corner and rent additional trucks to see if the market has actually turned around, the wave builds and they invest in new equipment. It’s followed that cycle forever and I’m seeing that happening now.”
Stuart P. Papavassiliou is senior editor of the Monitor.
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