Pittsburgh Independent Skeptical of Consolidation
“I was approached by Service Experts in their first year of acquisitions,” he said. “That was when their stock was trading around $34 a share, and it eventually nosedived.
“I was disappointed with them and the people at ARS. The people at the top were the ones who benefited [from the acquisitions]. They made promises they couldn’t keep, especially saying they would raise the industry standards, when in fact, profit margins have decreased.
“The early consolidation efforts of ARS and Service Experts did exactly what they promised to do — to create a lot of profit for the people at the top. Their goals were selfish.”
Rhule believes that not all consolidators should be typecast in the same mold.
“Some companies like Blue Dot give me the impression that they want to improve the industry and make things better and create a strong organization. These smaller consolidators seem to be focused on being truly service-oriented. They are not moving to build up this monster so they can dump it, at least not yet.”
Industry-Wide ProblemsRhule believes that a lot of problems associated with early failures by ARS and Service Experts have a lot to do with the hvacr industry itself. If there is anyone to shoulder the blame, it is the trade he works in.
“Our industry doesn’t care enough about ourselves to make us care about the industry,” he said. “We are comprised of a lot of bottom-feeders and uneducated people. Consolidators and contractors alike got what they deserved.
“They [consolidators] said they would bring up the level but are still selling products as if they were a one-man shop. It’s not a team effort — it’s a few guys at the top making the money.”
Rhule, who sells Lennox products, commented on Lennox’s acquisition of Service Experts last year. He said he wasn’t surprised by the move and predicts similar ones by other companies.
“I was watching Lennox buy contractors in Canada and I predicted that within a year, they would be buying up contractors in the U.S. It’s only a matter of time before Carrier and Trane do the same thing.
“But I don’t think the Lennox effort is going to work. They’ll probably start selling some of their dealerships back.”
Rhule has a strong argument when asked to compare himself with a consolidator who has set up shop nearby.
“I would sell the fact that we are a community-oriented company,” he added. “Profits generated by this company stay in the community. We support employees on the local level and we actually know the customers.”
But despite his own commitment to his customers and employees, Rhule said there may be a consolidator in his company’s future — “Hopefully one that cares,” he quipped.
“I don’t have a problem selling to a consolidator,” he added. “I don’t see my daughter in this business, and if I were to sell to a young employee, it would probably be to one who isn’t even working here yet.
“Everyone is out for themselves and I’m out for me, too. You’ve got to put in to get something out, but I believe that consolidators didn’t put enough money into the businesses and they could have injected good people as well if they were committed to the industry.”
Rhule thinks that future consolidation efforts in Pittsburgh should not repeat the mistakes made in the past.
“Consolidation didn’t work well here,” he said. “One company has trucks on the road that are in worse shape now than before their acquisition.
“Contractors who sold out to consolidators deserve everything they lost.”
Publication date: 09/25/2000