Ryder System, Inc.

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Ryder System, Inc.

3600 Northwest 82nd Avenue
Miami, Florida 33166
U.S.A.
(305) 593-3726

Public Company
Incorporated: 1955
Employees: 40,362
Sales: $5.16 billion
Stock Exchanges: New York Pacific Midwest

Ryder System, Inc. is a major transportation services provider with annual revenues in excess of $5 billion. Ryder operates the world’s largest full-service truck leasing and short-term rental company; North America’s largest new-automobile transport company; the largest independent jet-aircraft engine maintenance and overhaul company; a leading aircraft leasing and parts distribution company; and a leading provider of mass transit and school bus services throughout the United States. Ryder is the market leader in most of its operating areas.

In 1932 James A. Ryder gave up his job as a straw boss in a construction firm, and bought a Model A pickup truck with a down payment of $125. Ryder hauled trash from Miami beaches and delivered construction materials to Palm Beach. In 1934 he entered the truck-leasing business through a contract with a local beer distributor. At the age of 21, Ryder was the owner of the first truck-leasing firm in the United States, Ryder Truck Rental System, Inc.

In 1939 Ryder took on a partner, Roy N. Reedy, and the two men set out to build a trucking empire. Truck leasing was novel, and the company broke new ground. Highway trucking began to rival rail as a means of overland shipping, based partly on the vast network of better highways constructed during the 1930s. World War II boosted demand for trucking, as the war economy stretched the existing transportation system to capacity, and Ryder’s trucking and leasing operations grew.

The postwar era brought continued growth to the trucking industry as the interstate highway program further improved the efficiency of trucking. By 1952 Ryder was bringing in $3 million annually by renting 1,300 trucks. In the summer of that year news came that the Southeast’s largest, most profitable trucking outfit, the Great Southern Trucking Company, was up for sale. Ryder was familiar with Great Southern; his company leased its pickup and delivery trucks. Founded in 1933 by L.A. Raulerson, it had grown into the Southeast’s largest freight carrier with some routes as long as 1,100 miles. Ryder raised the $2 million asking price by December. His company’s revenues were then quadruple what they had been, and Ryder was a huge motor carrier, as well as a major truck-leasing concern.

The Great Southern acquisition put Ryder on the map. Ryder System, Inc., was created in 1955 to absorb Ryder Truck Rental and Great Southern, and the new company offered shares to the public. Shortly thereafter Ryder System bought more than 25 companies in five years. The larger companies included Baker Truck Rental, Inc., of Denver, Colorado; Barrett Truck Leasing Co. of Detroit; T.S.C. Motor Freight Lines, Inc.; the truck leasing business of Columbia Terminals Co.; Dixie Drive-It-Yourself System, of Alabama; the truck leasing business of Barrett Garages, Inc., of San Francisco; Morrison International Corporation; and International Railway Car Leasing Corporation.

This growth resulted in certain problems. The company had neglected proper financial controls. By 1960 Ryder System was forced to write off $2 million in bad debt, and profits dipped from $2.7 million in 1959 to about $1 million in 1960. A central accounting system was implemented to remedy the problems, and steady growth returned in the early 1960s.

In 1965 Ryder System sold the motor carrier division to International Utilities (IU), a diversified holding company. The trucking division grew under IU’s direction until its spinoff in 1982, keeping the Ryder name. Ryder System focused on the fast-growing truck-leasing business, and despite common misperceptions had not operated as a freight carrier since 1965.

The late 1960s saw the development of new services in truck leasing and rental. In 1967 Ryder began offering one-way truck rental service. This service had been introduced and popularized by the U-Haul Company several years earlier. Ryder started with 1,000 trucks and expanded the one-way fleet to 7,630 the first year. Competition in this field grew rapidly; Hertz Corporation and E-Z Haul, division of National Car Rental System, Inc., entered the field at the same time. As a result, the one-way market was oversupplied, and Ryder’s oneway unit got off to a slow start. Ryder was intent on capturing this market, however. In 1968 the company offered to buy U-Haul International Co., a subsidiary of Americo, Inc., but no deal was ever worked out. Ryder expanded its one-way dealership network through an agreement with Budget Rent-A-Car. While many competitors dropped out in the early 1970s, Ryder did not, selling surplus vehicles when necessary, and eventually surpassed U-Haul’s one-way rental in 1987.

In 1968 Ryder entered the new-automotive carriage business when it acquired M & G Convoy, Inc., and expanded it with the purchase of Complete Auto Transit, Inc., in January 1970. Ryder’s automotive carriage services were used by General Motors Corporation and Chrysler Corporation for the transport of new automobiles to dealerships. Also around this time, Ryder entered the dedicated contract carriage business, in which it provides transportation and distribution services customized for its clients.

In the late 1960s Ryder System diversified into services unrelated to transport leasing. In late 1969 Ryder made a foray into the growing temporary help industry, initially placing office and industrial personnel, later technical help. Ryder also acquired several trade schools in 1969 and 1970, offering courses in auto mechanics, truck driving, and a number of other technical fields. In 1970 Ryder purchased Mobile World Inc., a distributor of mobile homes and a mobile-home-park operator and franchiser. Also in 1970 an insurance firm, Southern Underwriters, Inc., was acquired, and later that year, a joint venture, Ryd-Air Inc., was formed to provide pickup and delivery service for 27 airlines in New York.

Ryder’s main line—full service truck leasing—remained strong in the early 1970s, but the company’s management was spread thin over a growing number of new service fields. In 1973 the oil crisis enticed Ryder to purchase Toro Petroleum Corporation of Louisiana to insure a steady fuel supply for its trucks, but the acquisition proved a somewhat rash move. The value of Toro’s oil reserves dropped as oil prices fell a few months after the purchase. Ryder had bought high and ended up with a $7 million operating loss.

Other problems caused a 13C per share adjustment after the company’s 1973 audit. They were adjustments in the calculation of receivables from the education unit, tax assessments on the mobile home subsidiary, and reserve assessments on the insurance subsidiary. The truck leasing and rental businesses continued to borrow in order to finance an expanded fleet. Ryder’s debts were more than $400 million, four times shareholders’ equity. Moody’s Investors Service downgraded Ryder’s rating on commercial paper in late 1974. Ryder System lost $20 million, and the company’s investors were deeply concerned. The board of directors began to question James Ryder’s ability to guide the future of the growing concern.

The recession of 1973-1974 had taken a heavy toll on Ryder’s vast contract carriage and automotive carriage operations, which were heavily dependent upon the welfare of the automotive industry. Although Ryder’s core business of truck leasing and rental was holding its own despite the hard times, company borrowing had gotten out of control. Stockholders displeased with the company’s troublesome acquisitions from the early 1970s demanded a refocusing of attention to Ryder’s basic businesses. In 1975 James Ryder, under pressure from the boardroom and his bankers, announced that he was seeking a “more professional manager” to run the still growing company. In the summer of 1975, after disposing of unprofitable subsidiaries like Toro Petroleum; Miller Trailers, Inc.; and the major portion of the technical schools, James Ryder stepped down as head of the company he had founded.

Ryder’s successor was Leslie O. Barnes, former head of Allegheny Airlines. Barnes inherited a company that was tattered after weathering a great storm, and the 59-year-old CEO was intent on whipping Ryder System back into shape. The debt-to-equity ratio was quickly pared from four-to-one to three-to-one. Ryder Liftlease Inc., a small but troublesome subsidiary was sold, as well as the remainder of the technical schools. Refocused on its primary businesses, Ryder rebounded. In 1977 the company acquired a major automobile carrier, Janesville Auto Transport Company, for $10 million in common stock. Ryder’s automotive carriage operations were profitable as a result of the industry’s rebound and tighter financial controls. During the 1979 downturn in the automotive markets, Ryder’s automotive contract carriage unit, representing 16% of Ryder System’s turnover, made a profit.

In the late 1970s Ryder continued to grow internally and through acquisitions in the full-service truck-leasing business, the company continued to lead the market, which continued to expand. According to Barnes, only 38% of the U.S. private truck fleets were wholly owned by 1980, down from 60% in 1970. The vast majority of fleets were at least partially leased. Encouraged by the basic business’s performance during the latter half of the 1970s, Ryder System once again began to seek acquisitions in new areas. Barnes, however, unlike James Ryder, was inclined to test out new ventures on a small scale before fully committing to them. In 1978 a parcel delivery service, Jack Rabbit Express, was acquired. A small property and casualty reinsurance company, Federal Assurance Co., was added to existing insurance operations.

By the late 1970s the one-way rental market was well-established. Ryder trailed U-Haul in this field, and in 1978, a third major competitor, Jartran Inc., joined the field. Jartran was an acronym for James A. Ryder Transportation. James Ryder gave up a $100,000 annual stipend to get out of his noncompetition agreement with Ryder System. The upstart company established by Ryder System’s founder and former head made a smashing entry into the field, building a 30,000 vehicle fleet in less than 18 months. James Ryder’s new company became a thorn in the side of his former company. The feisty Ryder appeared in Jartran ads as “the man who invented truck rental,” and his new vehicles resembled Ryder System’s enough to spark a lawsuit.

Nevertheless, Jartran had trouble making a profit. Once again, it appeared that James Ryder had grown too big too fast. A downturn in the economy in 1979 killed the short-term rental market. Jartran cumulatively lost $30 million in 1979 and 1980. In July 1981 Jartran dumped its commercial leasing division, and the company was foundering.

Ryder System, on the other hand, grew under the balanced leadership of Barnes and his new executive vice president, M. Anthony Burns. In the early 1980s, new tax laws encouraged diversification into new areas. Ryder began shopping for a financial services company in order to take full advantage of available tax credits. Insurance was the obvious choice because of Ryder’s existing insurance business. In September 1981 Ryder System announced its desire to purchase the third largest insurance broker in the United States, Frank B. Hall and Co. Hall, however, was not interested in being acquired, and maneuvered to avert a takeover. In October 1981 Hall announced its intentions to purchase Jartran, Ryder System’s troubled competitor, opening up potential antitrust obstacles for a takeover. Hall also filed a number of suits against Ryder.

Ryder System’s pursuit of Hall continued through 1982. By August Ryder System had boosted its holdings in Hall to 9.5%. Jartran was on its way to bankruptcy, but Hall had bought enough time to discourage Ryder System from acquiring any more Hall stock. In 1983 Ryder sold its interest in the insurance broker for $33 million.

In 1982 a severe recession shook the North American economy. Ryder System was well prepared with a $70 million cash surplus, and a very low debt-to-equity ratio. While the majority of transportation companies were devastated, Ryder System’s profits increased. Burns moved up to CEO, and soon proclaimed Ryder’s intention to “be more forward-thinking, more risk-taking.” By slashing prices in half on one-way rentals, Ryder usurped a huge chunk of the market. By acquiring two new strategically located automobile carriage firms, Ryder improved its efficiency by reducing the number of trailers sent back empty.

Ryder System’s long-standing desire to enter financial services was satisfied in 1983 when the company became an 80% partner in a pension fund specialist, Forstmann, Leff, Kim-berly. The joint venture set up long-term trusts for pension fund investors. Ryder also decided to revise its in-house business information systems and offer them for sale to other transportation companies, and contemplated a computer-services company acquisition to assist.

In its core transportation businesses, Ryder continued to make strides. Deregulation had been the industry trend since 1980. In 1983 new rules concerning single-source leasing allowed private fleet operators to get drivers through Ryder as a part of the leasing agreement. Private shippers were also allowed to solicit outside freight business, effectively allowing direct competition with independent truckers. Ryder set up a new division to handle single-source leasing, and bought three new freight packaging companies to book return loads for private shippers leasing from Ryder. In 1984, Ryder sold its Truckstops Corporation of America unit for $85 million to free managerial resources for more profitable businesses.

In the early 1980s Ryder System began to delve into another expanding transportation field—aviation leasing. In 1983 the Aviation Sales Co. Inc. and its subsidiary General Hydraulics Corporation, of Florida, an aircraft leasing and spare parts firm was acquired. In 1985 Ryder bought Aviall, Inc., a turbine engine repair and overhaul firm located in Dallas. Aviall was also a parts distributor. A number of smaller leasing and repair companies were acquired. By late 1986 aviation services made up about one-fifth of Ryder System’s revenues, and in 1987 the division branched out overseas with the purchase of Caledonian Airmotive, Ltd. The Scottish subsidiary serviced the big engines on British Caledonian Airways’ DC-10s and 747s, among others. Caledonian Airmotive complemented Aviall’s operation both geographically and in services offered.

By 1988 just six years after entering the field, Ryder System was the world’s largest jet engine overhaul and rebuilding company, the largest aviation parts distributor, and one of the largest aircraft and jet-engine leasing companies. Ryder’s aviation division counted 300 commercial airlines among its clients, and dozens of private operators. In 1988 revenues from aviation neared $1 billion.

Ryder’s truck leasing continued to surge ahead. In 1986 a major federal tax law revision made it desirable for private fleet operators to lease their fleets rather than buy. Ryder had been determinedly expanding its truck fleet; between 1984 and 1988 it nearly doubled. More and more fleet operators turned over the hassles of fleet purchase, maintenance, and insurance to Ryder, allowing them to concentrate on manufacture and sale of their products.

In one-way rental, Ryder excelled. The longtime leader in the field—U-Haul—was distracted as family members battled amongst themselves for control of the business. U-Haul started renting all kinds of equipment, from rototillers to hoists, and its truck fleet quietly grew old. In 1987 the average age of a U-Haul truck was ten years. Ryder’s, on the other hand, averaged two years, and had all kinds of features not found at U-Haul, like power steering, air-conditioning, AM-FM radios, fuel efficient engines, and radial tires. Ryder’s market share was 45%, equal to U-Haul’s in 1987, and surging forward.

Between 1983 and 1987 Ryder System spent $1.1 billion on 65 acquisitions. This time the company’s rapid expansion was readily digested. In 1985 Ryder entered the school-bus leasing business, and quickly grew to be the second-largest private student-transport company in the United States. Ryder also entered into public transportation system consulting and leasing at about the same time. Dedicated contract carriage received greater attention in the late 1980s. Ryder provided trucks, drivers, and management system design to speciality freight companies like Emery Air Freight, retailers like Montgomery Ward, Sears, and J.C. Penney, and newspaper publishers like Dow Jones and the Miami Herald.

In 1989 Ryder’s growth flattened out, but its potential in its existing areas of operation remained strong. Late in the year the company sold its insurance operations, and, anticipating the coming recession, trimmed its fleet to better match demand. Ryder had proven its ability to manage well in tough times during the 1982 recession. As the automotive carriage and commercial truck operations were in the downside of the cycle, Ryder focused on improving market share while awaiting a general economic recovery. Its success was demonstrated in 1990 when Ryder moved 39% of the automobiles shipped in the United States and Canada.

As Ryder System entered the 1990s, its full-service truck leasing, contract carriage, jet turbine aircraft overhaul and maintenance, and new aviation parts-distribution were performing well; and other units would eventually rebound alongside the manufacturing economy. Ryder had grown from a one-truck outfit to a massive concern leasing or renting more than 130,000 trucks and nearly 50 jet airplanes. It remained the leader in most of its business segments, and was well-positioned to take advantage of further sophistication of the transportation industry in the future.

Principal Subsidiaries

Ryder Truck Rental, Inc.; Ryder Truck Rental Canada Ltd.; Ryder Truck Rental, Ltd. (U.K.); Ryder Transport Services, GmbH (Germany); Ryder Distribution Resources, Inc.; Ryder Driver Leasing, Inc.; Ryder Student Transportation Services, Inc.; ATE Management and Service Company, Inc.; Ryder Temperature Controlled Carriage, Inc.; A.T.G. Automotive Transport Group Ltd. (Canada); Blazer Truck Lines, Inc.; Commercial Carriers, Inc.; Complete Auto Transit Inc.; Convoy Company; Delavan Industries, Inc.; Fleet Carrier Corporation; Janesville Auto Transport Co.; M&G Convoy Inc.; Aviall, Inc.; Caledonian Airmotive Ltd. (U.K.); Aviation Sales Company, Inc.; General Hydraulics Corporation; Inventory Locator Services, Inc.