Jerry Ahern Reflects on Ehrbar Inc.’s First Century

Thu February 20, 2003 - Northeast Edition
CEG



“It’s no accident” when a company celebrates its 100th birthday.

This year Edward Ehrbar Inc. achieved the unique distinction of successfully having been in business for more than 100 years. The company will see its name placed beside other centenary companies such as Ford, Cadillac, Harley Davidson, GE, E. D. Etnyre Co. and Turner Construction, to name just a few. The span of these companies has extended from man’s first powered flight in 1903, by the Wright brothers, to the near completion of a new research station in space. Literally, thousands of companies started during this time were unable to survive. What made the difference?

To reach this milestone, a business must demonstrate an unrelenting work ethic, unparalleled quality in the products and services it offers, a “customer is always right” philosophy, an uncanny ability by the company’s leadership to make “the right decisions at the right time,” a consistently dedicated staff and a bit of good fortune as well.

To congratulate Edward Ehrbar Inc. in the initiation of a year-long celebration of its 100-year anniversary, Construction Equipment Guide interviewed Jerry Ahern, chairman of Ehrbar, who has worked for the company for more than half of its century in business. We asked him to reflect on his service with the company, comment on the challenges the company has faced over the years, how the industry has changed and much more.

Jerry, what were the origins of the Edward Ehrbar Company?

A: The company was started in 1903 by Edward Ehrbar Sr., a timekeeper during the construction of the Queensborough Bridge, as a heavy hardware organization specializing in the rental of air compressors, small cranes, concrete mixers and the sale of hand tools.

In 1927, incidentally, the same year I was born, Ed Ehrbar Sr. passed away and the company leadership was replaced by Edward Ehrbar Jr. At this point the business was pretty much as Ed’s father had established it but with a degree of success that allowed Ed Jr. to expand his customer base, his physical plant and to achieve recognition in the industry.

In 1939, Ed Jr. got his first heavy construction equipment account — International Harvester. This was his first step into the distribution of whole goods. Although he continued in the rental business, the company took on a completely new perspective. I might add that throughout this period Ed Jr. had the assistance and support of his brothers Al , Joe and Chester who enthusiastically covered the bases for their brother and provided one of the “secrets” of Ehrbar’s longevity — a dedicated family interest.

In 1947, fresh out of the military and eager to succeed, I joined Edward Ehrbar Inc. in their Greenpoint, Brooklyn facility as a helper in the parts department. I guess that proves that there is no substitute for experience; I got plenty of it there.

Sometime in the 1940s, the Barber-Greene manufacturer’s account was added to the Ehrbar “line up” and the transformation from mostly rental to major distributorship sales was accomplished. By this time Edward Ehrbar Inc. was doing business with almost every contractor in the greater New York area, both small and large. Other lines represented included names like Thew Lorain, Austin Western and BLH.

Can you describe some of the most challenging times that Ehrbar has had to overcome?

A: The year that Ed Sr. started the business [1903] saw the sixth most severe depression in the United States. That’s a tough proposition for any young business. Ed’s determination and the loyalty of his customer base weathered that storm, defining another secret of Ehrbar longevity — development of a loyal customer base.

Our business has been and remains very cyclical. Appropriate and timely response to change can easily determine your survival. High points in the cycle point to sales of new equipment but carry the danger of tying your cash up in a mountain of traded used equipment. During these times, balanced inventory and turnover of both new and used inventory is vital to retain fiscal viability. Low points in the cycle emphasize the importance of rental activity and sales of used equipment. Too much new inventory and your inventory costs get out of control. Too much used inventory at the bottom of the cycle and your cash is tied up. I have seen this phenomena put distributors out of business. Another Ehrbar longevity secret — Timely recognition and response to economic change.

What do you mean by a loyal customer base?

A: A successful salesman armed with product knowledge and a strong desire to succeed will develop a social relationship with his customers. He becomes part of his customer’s team, providing the latest product improvement and information and is responsive to customer needs. A great many things have changed over the years but knowing your customers and being able to figure out a way to provide what they need to be competitively productive has not. And that’s more important today than it was then. It almost guarantees repeat business.

What are some of the ways Ehrbar was able to cope during difficult times?

A: Anyone who has been in this business for more than a few years has a litany of measures you take when the “wolf is at the door.” We have made good use of most of the ones you would label “respectable.” Cash management is the name of the game and efficiency in that department means effective credit management [when is a sale a sale? … not until the cash register rings]. You must get paid within a reasonable period of time. Customer credit worthiness is, initially, a prime consideration. Then support your customer’s purchase. If times are tough for you they are tough for him as well. He needs product support and will appreciate your efforts to maximize his productive effort. As I said before, this effort on his behalf will generate repeat business on your behalf. Everything else flows from your timely and accurate assessment of business conditions. Short work weeks to limit the lay-off of experienced personnel, receivables financing, physical plant contraction, elimination of unprofitable lines and examination and renegotiation of vendor contracts with out-sourcing of some administrative functions previously done in-house are all tools designed to keep your business in business when the “edges get rough.”

How has the technology of your business changed over the years?

A: Using technological changes in the aviation sector from 1903 until today as a time line, the construction equipment industry’s advances in technology have been almost as spectacular, though not with the same timing. Throughout the second World War and the period leading up to it, the industry was driven by normally-aspirated gasoline and diesel propulsion with tools driven almost exclusively by cable and winch. This equipment technology found its way into civilian production after the war and, for a while, dominated the market. Because of wartime necessity, aviation technology advanced more rapidly. From the late 40s and for the next few years the construction backlog from the war fueled the sale of whole goods with little rental activity. A large part of the business was excavation for housing, long ignored by the press of wartime activity. Ehrbar equipment worked long hours preparing homesites in places such as Levittown, Long Island. Postwar development was a large part of our business. At that time large size scrapers and bulldozers were in demand. Product competitiveness forced technological change and we began seeing turbo-charged engines and hydraulic tool systems in construction equipment that the aviation industry developed during the war. Our industry was catching up.

How did Ehrbar manage to get through the 70s recession?

A: We were then the Koehring distributor for heavy-hydraulic excavators. During this time, there was a big project on Long Island known as the Southwest Sewer District. A large percentage of the work fell in line with our product’s specifications. That work, and again, our loyal customer base, for whatever business they generated, managed to keep our business viable until economic conditions improved. Another important business segment for us at this time was sales to municipalities, which, to this day, is an integral part of our customer base.

How has equipment changed since you started in business?

A: As I mentioned before, the war seemed to dictate a pause in the technical development of heavy construction equipment quite unlike the aircraft industry. For example, engine usage is measured in hours, unlike the mileage measurement in automobiles, but much the same as with aircraft. Early on if you got 3,000 to 4,000 hours on an engine you were doing well. These days 15,000 hours is a minimum. Induction systems are much better protected today than they were earlier. When tool technology went from cable and winches to hydraulic it started a revolution in that application that is continuing today. High-pressure hydraulics and sophisticated electronics are the name of the game and have spurred the development of precise load and grade sensing devices and advanced diagnostic capabilities.

Operator comfort is an issue that also has come a long way from the old days of sitting on an unupholstered steel seat in the rain, cold/heat, dust and noise. It became apparent that a comfortable operator, shielded from the distractions of weather and job conditions, was more productive both in hours and quality of work. Air-conditioning and cab heaters are options included on the machinery delivered to our area in almost every case. Ergometrically-designed controls provide the operator a measure of operational precision that wasn’t possible a few years ago.

Scrapers were once pulled. When did they become self-propelled?

A: All the scrapers used in the late 40s and early 50s were pulled. As technology advanced from the pause created by the war, scrapers became self-propelled and then, in areas where conditions allowed, became self-loading. A self-loading scraper is self-propelled and comes with a bowl equipped with paddles to load itself. Its application was primarily in areas, such as central Long Island devoid of boulders, which could jam or damage the paddles. These scrapers very often required a push to start but could load themselves. There isn’t much of a call for scrapers these days. There isn’t much real estate left that lends itself to mass excavation. We haven’t sold a scraper in years, although there is still a modest rental demand.

Crawler loaders are another class of equipment that you don’t see much of anymore. Excavators that can dig and load for about half the price of a crawler loader have just about taken over that business. The market is so small for the crawler loader that it doesn’t seem to pay to continue development.

In the 50s and 60s, the three major manufacturers of heavy construction equipment were International Harvester, Caterpillar and Allis-Chalmers. The industry has become much more competitive. There are 15 or so manufacturers to compete with now and it is much more difficult to close a deal.

Do you see that continuing for the next 10 or 20 years? What about service?

A: Terex seems to be challenging that wisdom by buying a number of manufacturers, but I don’t see a significant reduction in the number of competitors in the near future.

The proliferation of manufacturers and the intense competition it generates has brought the subject of product support to the forefront. There was a time when service and support was a stepchild of the sales function. The average contractor could sidestep the distributor’s service department by operating a small shop and employing a small number of what we called in those days “wrench benders.” This is no longer the case. The word “mechanic” has changed to “technician” — and rightly so. The level of technical sophistication in our industry has risen so high, so rapidly, that to realize the benefit of all the advances in equipment, both the distributor and the contractor have had to change their thinking about product support. Parts technicians are trained to directly access manufacturers for inventory and shipping information. Fast response time to customer’s parts requirements is essential to the product support function. Today’s technician is a far cry from yesterday’s mechanic. He is better educated and is continually trained to stay abreast of rapidly changing technology. Because this activity is complex and expensive, the burden of training for accurate diagnosis and repair is falling to the manufacturers and their distributors. Only the larger contractors have the resources to maintain the intense training required to adequately support today’s machinery. Manufacturers and distributors must emphasize training to assure that their customers are realizing the increased productivity of their equipment. The distributor who fails to recognize the new value of product support is in for a rough ride with his customers.

Is there any relief in sight for the shortage of trained, experienced technicians?

A: The Associated Equipment Distributor’s (AED) organization is at the forefront of this issue. They have a number of programs that emphasize the importance of basic training for the technician profession at the high school and college level. They also promote the personal satisfaction and rewards of a career in the technology of today’s construction equipment. Manufacturers also realize that today’s technician is vital to the successful operation of their equipment and require distributors to send their technicians to factory schools at intervals as short as every six months. These trained technicians then mentor customer personnel in the operation and maintenance of their equipment.

How have the large rental companies affected your business?

A: They are here to stay. We are in direct competition with them in some markets. The smaller contractors and landscapers begin by renting equipment and as they grow they will tend to buy the brand that they have been accustomed to using. Coming out of a low economic cycle, a contractor will rent until he can see six months or a year of work ahead of him. If you are not in the rental business you won’t get a shot at the sale a rental may generate. It’s difficult to compete with the large rental houses, though. There are hundreds of rental service or rental store companies throughout the United States. The resulting competition has made it necessary that we all be in the rental business.

How can you compete with the large rental companies?

A: Many rental companies just don’t speak the language of the heavy-equipment contractor. We have had years of practice helping contractors with things such as sizing of equipment to their jobs and measuring production. Machine statistics are second nature to our sales force and contractors value assistance such as this. The main factor that differentiates us from a pure rental house is product support and overall equipment expertise. We are experts at the operation, maintenance and repair of the equipment we sell or rent. We are available 24/7 and factory trained to assist the contractor in all aspects of the machinery’s operation. We are better prepared to provide replacement rental equipment of the same size. For example, a contractor’s nightmare is to have a machine “go down” in the middle of a job. Job-site crews can have a minimum of 10 workers, a series of trucks and other equipment dependent on that one “down” machine. In a situation such as this you had better be ready to support your equipment or the situation quickly becomes a monster problem. Even the situation of equipment in transit becoming stuck under a bridge requires fast response time. I believe we are better prepared to provide this type of service than most rental companies.

Do you feel it’s more difficult to sell today?

A: It’s a much more time-consuming process. Once you have been through the specifications of the equipment, its production and its maintenance, there is still the question of finance. We are very much like the automobile business today in that we are interest rate sensitive and it takes time to negotiate the financial aspects of a deal. Most major manufacturers are now in the finance business.

How does today’s sale contract compare with the past?

A: There was a time when you could do business with a handshake and it still does happen once in a while, but it is, by far, the exception to the rule. It’s important today to have a complete contract with all the “I’s” dotted and the “T’s” crossed. There is a lot more “boiler plate” to the typical sales contract today especially when you factor in maintenance contracts, parts availability guarantees, uptime guarantees, lease returns and even buy backs. It’s a lot more complicated today. There is little time for the long-term personal relationships to develop although ours is still a relationship business. Banking requirements also place strict administrative requirements for finance operations as well

Is doing business in metropolitan New York different from other areas of the country?

A: Life and the conduct of business move a lot faster around here. You have to be on your toes. The cost to do almost anything in this area is considerably higher than in other parts of this country, a fact that manufacturers find difficult to understand. This is not the midwest. Our retail rate is, of necessity, much higher than most areas. Our union contract calls for more stringent work rules. There are a good many restrictions on our ability to move machinery and they are not all coordinated. Certain weights cannot be moved during the day, others require escorts. For example, it could cost $3,000 to move a machine from our place of business in Pelham Manor to Staten Island and that is not that far. Bridges we use regularly all have restrictions that incur additional cost. We may move to the Nassau County line from the city at night but have to wait until the sun comes up to continue into the county. A maintenance problem with the truck or a flat and you can easily lose 24 hours. Your reaction time must be fast or you lose the opportunity. Competition is fierce.

How will it affect Ehrbar if New York gets the Olympics in 2012?

A: Getting the Olympics in 2012 for New York City would be tremendous. It would trickle down to a significant amount of sales and rental opportunities. Hopefully the contractor that gets the job to build a stadium will provide some business. Actually, there is a lot of work in the New York area right now. The bridges all need repair and they are adding HOV lanes to all the major roadways to and from the city. There is a ton of work available if our economy can afford the expense. In the past six months, the Long Island Expressway had $200-million worth of work. Every major roadway in and around New York is either under construction or is scheduled for reconstruction of some sort. There is talk about building a tunnel under the Tappan Zee Bridge and/or a new span alongside it. There is an ongoing $1-million study to determine the best way to add capacity to the crossing. Land acquisition seems to be a problem as well.

Ehrbar has been in business for 100 years. You have been with Ehrbar for better than half that. We’ve talked about a lot of things: acquisitions, mergers, recessions and wars. What does it take to survive in business through all of this?

A: Good management and experienced, dedicated staff. You must know what you are doing, know your customer, know your product, watch the numbers, keep inventory of new machinery and used in balance. Train, train, train to provide superior sales effort, product support and response time.

Jerry, you mentioned “family interest” earlier. What part does that play in your business?

A: You have probably noticed that the construction and construction equipment businesses, especially at our level, are very family oriented. They require a large investment in personal time and an enthusiastic family enterprise facilitates that. My father raised a large family and my wife, Tess, and I have enjoyed one, as well. Were it not for the successful partnership Tess and I have established between family and business interests all these years, any success we achieved would have been very difficult indeed. I am pleased that three of my sons have chosen to follow me into the business.

It’s really keeping track of the basics isn’t it? Is there anything you would have done differently?

A: Not that I can think of. I think I’d be willing to do it all over again. It’s a great business.