January 15, 2005
Ryder heads in new directions
By Ina Paiva Cordle
Knight Ridder Newspapers
MIAMI — The next time you spot a CVS truck driving down the street — you’re probably really seeing a vehicle owned and driven by Ryder System.
Ryder’s customers include a score of other household names, like General Motors, Toyota, Honda, Xerox, Bacardi, Lucent Technologies and Philips Consumer Products.
The service Ryder offers runs the gamut, from running warehouses, providing trucks and drivers, to handling the logistics of delivering parts for manufacturing.
And when someone orders a Xerox copier, it is a Ryder employee — wearing a shirt bearing both Ryder and Xerox logos — who delivers the copier, sets it up, and trains the staff on how to use it. If it breaks down, a Xerox technician goes to a Ryder- managed service parts warehouse to pick up the part.
"In many cases, the relationship we have with Xerox’s customer is just as important as the relationship Xerox has with its customer," said Tony Tegnelia, executive vice president of Ryder’s U.S. Supply Chain Solutions.
A similar behind-the-scenes effort has transformed the Miami-based company.
Years of cost-cutting, centralizing business functions and improving efficiency have made the company leaner and more competitive on pricing in a fragmented industry. And every dollar of additional revenue requires only incrementally higher costs, boosting its earning potential.
Now Ryder is embarking on a new stage of growth.
Ryder’s 71-year history, old-fashioned business principles and focus on providing customers with full-service truck leasing, commercial rentals and logistics may seem decidedly unsexy.
But as Chief Executive Greg Swienton said, "Anything that makes money is sexy. Our investors don’t think it’s boring to get a better return than anything in their portfolios."
The 55-year-old Swienton, Ryder’s chief executive since 2000 and chairman since 2002, has personally reaped rewards from the company’s success. Through performance-based stock incentives, he and his beneficiaries’ Ryder stake has swelled to 727,815 shares and options, based on the company’s May 7 proxy. The current value: $37.7 million.
Observers credit Swienton with bringing sorely-needed discipline to the company.
Ryder "has done a tremendous job turning the company around in the last several years from a company that consumed cash and did not have the financial or operating disciplines in place throughout the ‘90s, to a company that has taken some aggressive and effective actions to control and take out costs," said Jon Langenfeld, vice president and equity research analyst with Robert W. Baird and Co. in Milwaukee. "So what you have seen over the past three years is really earnings growth from right-sizing the business."
By the end of the first quarter, the company will finish shedding its old skin. It will move out of its rambling headquarters built in 1973 into a smaller building now under construction.
Next in store is likely more global expansion, as Ryder pursues a simple strategy: increase revenue and improve margins — and, therefore, profits.
"If you build on the foundation and stick with that and not waver and not vary, the stock price takes care of itself," Swienton said.
Ryder’s path has required a relentless focus on managing and reducing costs and transforming how the company does business.
Ryder had a heavy overhead that lingered from the 1990s, when the company had seven divisions, including its yellow truck rentals and aviation services, which were sold last decade.
Division presidents ran their businesses independently, developing their own strategies.
"Now it’s one big group, thinking on behalf of the whole company," Swienton said. "So strategy is consistent: how we allocate capital, how we set targets for new growth."
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