Chris Kohart and Ron discuss the industry and change.

Sure. Well, unfortunately, I've been around long enough to say I've probably been almost everywhere, but originally I'm still from the New York, New England area. Spent the entire career either in the heavy equipment distribution business or in the IT industry that supported heavy equipment dealers. Got my start. My dad and uncle owned an equipment dealership that was based in New Jersey and New York City. They sold air compressors and concrete conveyors when I was a kid. So I was interested enough in the business that by the time I was old enough to talk and express it, whenever I wasn't in school or somewhere else that was important, I was at the dealership. Whether I was gassing up the portable air compressors or as I got older, knocking concrete off the rental conveyors. Grew up in the business, loved the nuts and bolts.

Still remember the first Wisconsin four-cylinder air-cooled engine that I tore down and rebuilt that actually started and didn't throw a piston or something through the side of the block. Imagine. Yeah. So I've been in the industry for many, many decades.

Well, I actually started part-time when I was in high school. So that was in the early 1970s. Then about halfway, I did not go away to college. I went to college living at home and, of course, worked at the dealership in between classes, et cetera. And in mid-77s, so halfway through my sophomore year in college, our parts manager just up and quit. This was back during the big American construction equipment service parts export boom. And being located just outside of New York City, the company did a tremendous amount of business with Aramco up in the Alaskan pipelines, you know, throughout the Middle East and even into the Soviet Union. So I had been working and helping in the parts department for a while and wound up, I don't know whether I was smart enough or dumb enough, but raised my hand and said, you know, I'm the guy that can step into this and I'll finish college at night.

So I convinced my employer, who happened to be my old man and my best friend, that that was the best thing to do. So I wound up taking over the parts operations. And that 80% of what I did in volume was international. So I spent a lot of time at the World Trade Center with the guys from Aramco. That's where the U.S. or the New York operation was based also with AGIP, which is the Italian national oil company. which was a fantastic ride. Actually, we had a couple of recessions here that some of us older folks might remember in the late 1970s that brought the prime rate up over 20%. And we had a nice gentleman with a sweater who couldn't quite understand energy policy sitting in the White House, which did wonders for our business internationally. We actually crashed the construction market. So that kept the company afloat for a few years, which was a lot of fun. So that's where I got my parts expertise.

I remember one time, every time we sold parts overseas, it was on a letter of credit that was payable as soon as the parts hit the New York pier to go overseas. A lot of the letters of credit required inspection of these orders, and some of them were a couple thousand line items long. And I remember one time we were dealing with, I can't remember the... the acronym for the outfit, but it was Soviet-based. And two commodities inspectors from the Soviet consulate in New York drove out one Friday afternoon to inspect all of these parts. And you want to talk about two guys that look like they belonged in the godfather. I mean, they were making sure that we were honest. So that was great until the export market just kind of... Came to a grinding halt around 81, early part of 82. So we wound up consolidating the business. The majority of the dealership stayed in New Jersey. We closed down the New York side of the river operation.

So we went back to school for a little while and wound up meeting my bride, getting married. And the rest of the college education sort of went on hold. bounced around, did a few things in the golf and turf industry and their distribution, and then got back into the heavy equipment industry with a Komatsu dealer here in the New York area as their general service manager in the mid-90s, stayed in that role, ran both, ran the service operations for the metropolitan New York City, Long Island, and lower Hudson Valley region that this dealer had responsibility for, corrected a lot of sins from the past and really put a business operation spent on the service department. As much as fixing a machine isn't important, you have to be able to do it in the proper manner, be able to fix it right the first time, and also have happy customers afterwards and be able to present an invoice that can be paid.

So spent about four years in that position and then was promoted to their product support manager position, taking over now operation, of course, for parts and service. And then ultimately became vice president of operations, adding other facets, however, still keeping a very strong hand on product support within the dealership. And it was, of course, as most dealers are here in the States, family owned. I had sort of hit the glass ceiling. And while I personally really enjoyed working with the ownership, we had some philosophical differences. So around 2008, I was approached by. a Microsoft technology implementation partner. So in the Microsoft world, they have all their own sorts of vernacular, just as we all do. But really, they're dealers that implement software. And Caterpillar for years had been on a CAT-designed platform.

As many people listening to this probably remember, is DBS, which is still very much alive here, eons after it was developed and the forecast demise. They had been, I don't know whether they were fortunate enough or unfortunate enough to sell the first Caterpillar dealer in the U. S., a Microsoft complete end-to-end ERP system, which covers the total operations of the dealership, whether it's parts, CRM, service, equipment, rental, and then everything that goes down to it. The only problem is I don't think they realize quite how complicated our business or our industry was when they first sold it. They had been in this implementation for about a year, and the dealer in question, which is an excellent, well-run dealership here in the States, it suggested to them they may want to start thinking about bringing people on board who understood the business and also understood something of the ERP industry.

So somehow I got one of those recruiter phone calls out of the blue to somebody who is at a pretty senior level in a dealership that... would know all of these things and may have an interest. So for good or bad, I said, let me think about it. I brought it home, discussed it with my wife, and she said, yeah, but why not? So I made a phone call the next day and said I might be interested. And the next thing I knew, I was on a plane to go for an interview because I fit the profile perfectly. And my start date with this outfit happened to be July 1st,2008. Again, right at the tsunami of the perfect storm was coming through in Preston. So I realized pretty quickly that this is going to be a little bit of an interesting ride. The company I actually worked for had been terminated by the CAT dealership. The day they interviewed me and offered me the job, which had been 45 days prior, without my knowledge, they had now taken a secondary position.

in the implementation and then european-based software developer who had done some work for a cat dealer in the european marketplace very small dealer had taken over uh so i wound up spending a lot of time at this cap dealership watching the way the people you know were their consultants were working giving them guidance on you know this is how you know the industry really works and the people at this cat dealership aren't telling you something that's wrong. They're telling you this is the way it is. And, you know, actually their procedures are pretty rock solid and, you know, they're not doing too many things wrong. They've got a good crew. So I spent two years with this outfit and decided as soon as the economy became well enough to move forward and there was enough business again in the heavy equipment industry, I was going back to where the rubber hits the road. I was not a computer consultant. I guess it was around 2010.

Finally, you know, there was some light at the end of the tunnel, started talking to a few dealerships, you know, back up here in the Northeast area. And, you know, leap of faith actually gave my notice at this Microsoft consultancy before I had even come close to having a job offer. I just did not want to be involved in that anymore. And I gave them sufficient notice to replace me because they still had projects going on. During that time, the individual who ran the company that took the implementation business away from this cat dealer approached me and had a vision of going direct into the marketplace here in the U.S. and worldwide. This Caterpillar dealership that I've been working at as a consultant was scheduled to go live pretty soon. And it was going to be a success. It looked like everything was working great. And somehow, as they say, I drank the Kool-Aid. Decided to go on. I was employee number two here in the U.S.

Took over as a global executive vice president responsible for sales and then also building a U.S. team. And over the next six years, built a relatively successful operation, sold and implemented the software at more than a dozen Caterpillar dealers globally, including Microsoft's biggest ever dynamic CRP sale in. you know, in the Asia Pacific region at a Caterpillar dealership. And then in 2016 left and went to work for a different consultancy. And finally, about 2020, in the middle of COVID, just got tired of the global travel. I think I've logged, I think my Delta card tells me I have 2 million miles logged and that's within about a 10 year period. So just about had enough. So since then I've been, doing a little consulting work for dealers that are looking to improve their processes and also potentially looking at whether it makes sense to stay on the platform they're on today or move to a new ERP platform and just really enjoying life.

So that's a little bit more on the 30 second elevator speech.

And they're

Absolutely.

That's right.

Yeah, you're absolutely right. And I've seen it now for more than 20 years. You know, when telematics first came out, I guess sometimes the dealer principals would refer to me as the propeller head because I was looking at the technology and already figuring out how I was going to put it to work and make some money. And as you mentioned, telematics was one of them. We ran a pilot program for a large customer on Long Island, east of New York City. It was extremely successful just showing. And this is back in the day where it was basically our meter and geolocation. You could geofence. That was it. And that was just mind-boggling technology. You know, everything you have today, just imagine the service department that can call a machine owner and tell him, we're already on our way. We're getting this error message. We'll be there at lunchtime to confirm what we think.

But if that's the case, we may need to down your machine for four hours, because if you don't, you're going to blow a wheel seal and you're going to wind up destroying a front planetary on a machine, which is now catastrophic. And being able to go confirm and either do a battlefield repair or schedule it so the machine's back up in the day instead of a week or even longer. That's just an oversimplified example of what can be done. There are so many different ways that we can take today's technology and use it not only to improve our customer satisfaction or our pins, but also to increase our cash flow, increase our revenue, and what goes to the bottom right-hand corner every month, whether it's just down to do... better ways to monitor and close your whip in time.

There are so many different things, as you mentioned, there's tools with AI, with telematics, with all the integrations and the ability to have information pushed to you instead of going and look for it. Even if you're on a 50-year-old green screen business platform, you can still do it. And I just don't see the adoption and the enthusiasm around it. That should be out there.

A friend of mine has

Yeah. I've met him quite a few times.

Yeah, he was over at Gallagher Point.

That's right.

Now, again, Ron, these are all areas that even a small dealership, a two-location dealership that doesn't do $500 million north per year in turnover can adopt. It doesn't require massive amounts of money. The technology is so easy. to obtain and so easy to deploy. And it doesn't require heart surgery. A dealer doesn't need to go and rip out whatever they have and replace everything and hope for the best and wind up, you know, everybody hears that, you know, better than 70% of ERP adoptions fail. Well, it's because people aren't prepared. So if that's not your cakewalk, then there are ways to add on to what you're doing. You've got to just open your eyes to see what's out there. And yeah. You go on Amazon and you click and order a book. And here I live about 100 miles outside of New York City and even up here in rural Connecticut, we have same day Amazon.

If I order by five o 'clock in the morning, there's one of those blue Amazon vans throwing it at my front door around three o 'clock in the afternoon. It's the technology is available to anybody if you're willing to subscribe to it. Whether you use, you can use the Amazon storefront, you can use your OEMs. They all have storefronts. Some of them are pretty weak. Some of them are halfway decent. But Ron, as you said, they all lack what, not one of them has what should really be there. But you as the business owner can drive this. And it's the same thing with, you know, the generation that has taken over from us or is slowly taking over from us. You know, as Ron said earlier, there are many dealer principals hanging around that are our age, whereas 50 years ago, Ron and I would have been put out to pasture a long time ago. But there is that generation coming up where they want to be able to do it now.

And if they decide they need to rent something, they need to park, they're going to do it at five o 'clock in the morning while they're having breakfast or it. Two o 'clock on a Saturday afternoon as they're sneaking out of their kids' ballet lesson, whatever it might be. And they don't want to wait until seven o 'clock Monday morning when the parts department opens. They want it that day or the next day. And the technology is there. And just think of what you could do for your business by just adopting one of these technologies. You'd blow your competition right out the window.

Oh, absolutely. It's been coming for a long time.

I was actually involved in it back in my dealership days. We started looking at this concept. and thought it was a huge profit potential. And basically, it's basically equipment as a service now. It is not, you know, an asset. You know, again, since you and I started in this business, you know, equipment has become, is more commoditized than ever. It doesn't matter whose logo is on it and what shade of yellow or green or orange it may be. We're looking at productivity and, you know, what's always made the difference is the local dealer, the ability to support. you know, and promote his, that dealership's customers within their territory. And that's still going to be the case, whether it's, whether, you know, some of the big guys, the guys from formerly from Peoria or the guys from Japan decide to go direct to market. That's great. For some dealerships that actually, it actually leaves some capital overhead drastically.

Most dealers don't make a tremendous amount of money. It's not like when I started in this business. Gross margin on a whole goods sale was 20% or 25%. You talk to people these days in the business, they know it as an old man's tale. They can't believe it. Where the business is going is product support. And then you have to bring up that nasty thing called an absorption rate. It's been more and more important over the last two decades, but continues to be, as is the rent-to-rent industry, because that'll never go away. And I've been saying since the mid-aughts that if you're not in the rent-to-rent business and don't have a rent-to-rent business, you're not going to be around in 25 years. So maybe my timeframe was a little too short. But there are some dealers out there that have experimented with it. There are some dealers, especially some of the very well-capitalized dealers, that have done it and done it successfully.

But again, it's a paradigm shift that is going to hit us like a tsunami when it does. And the Ford announcement was very interesting, especially in a car. What do you need technicians for? You know what you need? You're going to need guys that can change brakes and balance tires. And of course, you know, collision shops. But short of that, you know, the batteries go dead. The batteries fail. You replace the batteries. That's not a technician. That's just. almost a robot. You don't need any real expertise to do that. You'll need to be able to diagnose some of the onboard software. But again, you plug your laptop in and AI and the way we've come with modern technology are pretty much self-diagnosis. And you don't need to have any real intelligence to be able to fix it. So yeah, that's where we're going. I don't know if we'll see it in the next five or 10 years, but it's going to be predominant by mid-century, at least in my humble opinion.

That's right.

Absolutely. For life. Yeah. Well, we've done such a good job of making that avocation unsexy. Nobody wants to get their hands dirty anymore.

Yep.

That's right.

I know.

Absolutely, Ron. Always a pleasure. We need to get together and chat more often.