Rush Enterprises Chairman, CEO and President Rusty Rush and COO Mike McRoberts sat down with trade industry reporters during the company's annual technician skills competition to discuss trucking industry trends, technician retention, and truck sales.
The backdrop of this conversation was Rush Enterprises’ 17th annual Tech Skills Rodeo, held in San Antonio, Texas. The event brings together the company’s top technicians, as well as sales, leasing and parts employees, to compete against each other in various hands-on challenges to test their skills and knowledge. This year, $300,000 in cash and prizes were given to about 200 competitors.
Those 200 were taken from a pool of over 2,000 technicians and other employees who took 3,400 tests to be able to qualify to attend. The 2022 Rush Enterprises Tech Skills Rodeo All-Around Grand Champion was Paul Crawford of Rush Truck Centers in Haines City, Florida.
The following questions have been edited for brevity and clarity, and the answers edited for grammar and shortened for length.
HDT: Rush Enterprises has invested heavily in tech development. Through the Tech Skills Rodeo alone, Rush Enterprises has given $2.7 million to date to technician competitors. Do you recognize a return on this investment that you attribute to this competition?
Rusty Rush: I don’t know that we have one great measurement, but I do know we have a lot of long-term technicians that I know have benefited from a retention perspective. Those more seasoned [techs] have thoroughly gravitated towards [the competition] because they’re the best, the most experienced. They’ve got the skillsets.
Mike McRoberts: From a Level 3 and up, we have really good retention on those [technicians].
Rush: When you get up from that Level 3 through 5, it's hard to pinpoint exactly … but you know it’s helping. What credit goes to it and the other programs that you have inside the company to recognize people? But I guarantee [the Tech Skills Rodeo] is the biggest one from an internal recognition perspective that a technician can receive to qualify to come here.
It’s rewarding for me … it’s keeping me here; how’s that? (Laughs).
Question: What are the challenges of training technicians?
Rush: Everybody thinks you get trained up as a technician and it's over with. It's not. These [technicians] are constantly training throughout their careers to maintain their levels — Level 1 through Level 5, the way we grade them. And so, it's a constant. You can look at it as expensive, or you can look at it as an investment. We look at it as an investment.
Retention is the biggest obstacle we face. And it’s in the early years [of a technician’s career when retention is the biggest challenge]. That's why I think you see us having the Rising Stars — which we used to not have until a couple years ago during this competition — because you are doing everything you can to recognize. Editor’s Note: Rising Stars is a segment of the technician skills competition for Level 1 and Level 2 technicians.
The hardest thing we deal with right now is retention. And it’s not us – well, it may be (laughs), but it's the industry. Just like in trucking, you know, the truck driver is the highest turnover position, right? Well, for us, unfortunately, technician is about the highest.
McRoberts: About 40% of the techs that we do lose go to a different industry. The remaining 60%, I would say training and retention go hand-in-hand. We’re piloting a couple dedicated training programs in Houston and in Indianapolis. Our survey and feedback information tells us the same thing … [training and retention] are pretty interlocked.
HDT: How has Rush addressed the supply chain issues across the industry?
McRoberts: The supply chain is normalizing for sure.
The best way to characterize that is, it was more acute at the beginning and just over the years kind of diminished with suppliers. I think more importantly on the truck supply side — whereas last year initially they had no line of sight on when they're going to get a supply chain disruption, no notice and next thing you know their plants are down — they will tell you now that they feel pretty secure about their production lines. And they’re having the foresight of if there's going to be any kind of disruptions.
Overall, we've gone from this crazy environment where you are getting crazy 400% price increases … to a lot more normalizing. But there still are backorders of stuff, especially if it’s a Chinese production issue.
Rush: It's a lot of labor issues with suppliers right now. A lot of [truck makers’] suppliers, sub suppliers, are having major labor issues. So, they have to go get involved and prop them up to help them get through it all. But, you know, the OEMs in my mind have learned a whole lot, like a lot of us did, during COVID pipeline shortages and things like that. We sure learned a lot about how to manage and plan our business better. This industry was always “BUILD!” everything they could when they could, and you’ve seen a little more discipline driven by what has happened. Now, I’m not sure that they would have had the discipline [otherwise], but the macro of supply shortages has driven a discipline. And also, they've gotten pricing and they like that, instead of over supplying.
HDT: CNG/LNG seems be the focus of Rush’s alternative fuel offerings. What is the vision for Rush when it comes to natural gas?
Rush: If you’re asking about the large carrier over the road, well, electric’s not going to be there. For a full truckload guy that's running 500 miles a day, it's just not going to be there.
Well, guess what we have? We’ve got ESG: environmental, [social, and] governance. And a lot of these public companies — I know because we are one — are under pressures to do something that helps the environment, which is the proper thing to do. But since electric’s so far back, we believe, and Cummins believes also, [in a natural gas future.]
We had a natural gas fuel system business that we started in ’14. Back then, at that time, natural gas was supposed to be 10% of the market by ’17. But it didn’t happen. It stayed at 2%. Cummins believes, and we believe, that it will grow because people are going to be looking for something from an environmental perspective, and there's not going to be an alternative for the over-the-road person, this long-haul type stuff. So that only makes sense.
And so, they’re bringing their 15-liter [natural gas engine] over and we’ll be running prototypes for several years starting in the first quarter, and should by the first of ’24 have a 15-liter answer. Hopefully, we’re selling a lot of fuel systems, too [through Cummins Clean Fuel Technologies, a Rush and Cummins joint venture]. We’re preparing for that to happen. I don’t know if it was just 8% of the market, or 7% of the market, that’s going to require a huge jump, but we’ll participate in that with Cummins on the fuel system side.
They’re [trucking companies] are going to have pressures to do something, and there is no other [feasible alternative fuel.]
HDT: Last year the acquisition of Summit Truck Group was one of the largest in company history. Has the integration gone as expected, and have you noticed a return on investment?
Rush: You better believe it was accretive. And it should be more accretive because we're nowhere near what it will be.
Over time what you learn is that businesses are not just right here (alluding to the executive team by gesturing to himself and McRoberts). Businesses are people. Businesses are culture. Businesses are different systems.
You know, we had to switch [Summit’s] business systems. That didn’t get done until close to mid-year . You know, that's very traumatic. It may not sound like much, but it truly is very traumatic on an operating business, because you’ve been operating on the same system doing the same thing every day for 20 years. And this group comes in and buys it and says, “Here, we’re going to give you a new system.” Long-term we believe it will be a huge benefit, given that we stand by what we’ve got because ours is an in-house system that we’ve invested millions and millions in over the years. So, they’re going through all of that. Still nicely accretive to the earnings to the organization with lots of upside.
HDT: Do you have any acquisitions plans for the coming year?
Rush: I’m always looking, but we don’t have anything real big on the board.
We’re always investing, we’re always opening up new stores, we’re always buying some real estate and a little independent place.
Q: What are you forecasting for 2023?
Rush: I'm not here to be an economist and predict, but next year  will be down some — more back half loaded. Because, you know, we were short when it comes to truck sales. With what happened in ‘20 with COVID and in ‘21 with the supply side. And even this year in ‘22 on the supply constraints. You know, we were probably 80,000 to 100,000 trucks short.
Now, we're catching up right now. You can look at delivery numbers for the last couple of months of the year. It's going to be way up from where it was to start the year. We started the year in the 49,000 range, and we’re well over 70,000 – and I use U.S. numbers, not North America numbers. And that will probably continue into the first half … Used truck values are down, borrowing rates are up, and contract rates are going to come down.
Is it catastrophic? No. But those are all negative data points. So, you know, combined it’s going to slow down a little bit. Most people will tell you it’ll be a six- to 12-month recession; call that a little ‘r.’ You’ve still got some varying predictions about what retail sales will be next year, but I don't expect them to be at their strongest this year but be more front loaded and a little bit softer on the backside.
Our parts and service business is still holding up fairly well. So, November was a little bit softer, but that’s seasonal. November, December, January are always looking for us — and most people — a little bit softer, and just because of seasonality. Once it starts warming up, it seems to pick up. But you know, we are paying keen attention to a lot of data points.
I don't expect a bad year by any stretch, but it may be softer on the back end.