Cummins Power Generation: Power in rental

Cummins Power Generation, Minneapolis, lists itself as a rental company, but doesn’t necessarily have a traditional rental store or branches except in places like Saudi Arabia and Mexico.

The company does have a network of distributors in 130 countries around the world that can rent equipment and also sells everything from engines and components to alternators and complete on-site power systems.

United Rentals, Hertz Equipment Rental Corp., Sunbelt Rentals, Aggreko and other rental companies both purchase equipment from Cummins Power Generation as well as rent generators and power systems as needed.

“We started the rental business in 1999 because of the Y2K concerns people had. As a rental company, we could put in 1,000 MW of power in a short amount of time,” says Larry Fetting, general manager, Americas rental segment sales for Cummins Power Generation.

“In 2008, we asked ourselves if we were going to grow distribution fast enough or if we needed to use alternative ways. That’s when we said we wanted to get into rental in a bigger way and looked into selling rental equipment. Initially, we sold to Hertz and it’s kept on going. Aggreko is one of our biggest customers today,” he says.

“We also re-rent to Hertz, United Rentals, Sunbelt and more, because mainly all we rent is power. We make a good partner for them because we don’t compete directly,” he says.

The company also targets a variety of industries as “rental power” customers, including commercial, construction, data centers, entertainment, government, health care, hospitality, institutional, manufacturing, telecommunications, mining, oil and gas, retail services, media and utilities.

“The distributors operate our rental fleet. From a corporate perspective, we don’t operate our own fleet, so we are somewhat independent. That’s why we can sell internally to our own distribution network and to the bigger rental houses such as United Rentals. We’re sort of seen as neutral,” says Scott Strudwick, Cummins Power Generation’s business director for the global rental segment.

“In many cases, we walk this interesting line between being a supplier to some of our competition that also rents out the same type of equipment. We’re the largest provider of alternators to the world on the component side and we sell engines to many of our competitors on the rental side. That balance is fine. It makes us more genuine and stronger in the industry because it puts more of our engines out there in the rental marketplace,” Strudwick says.

Caterpillar, for example, is one of the company’s main competitors in power generation, but Caterpillar also buys components from Cummins, Fetting says.

“The paths to market can be quite confusing sometimes and lead to challenges, but if you work it correctly and play to the mutual benefits, everyone comes out a winner. With the re-renting program we have with our distribution network and companies like United Rentals, everyone is a winner,” Strudwick says.

Cummins Power Generation is part of Cummins, Columbus, Ind., one of the world’s largest engine manufacturers. Overall, Fetting
says Cummins currently is an $18 billion company with a target to grow to $30 billion by 2015.

Power generation is the company’s third-largest component and rental within power generation is considered one of the company’s fastest growing segments, having tripled sales each year for the last two years.

“We know that is not sustainable long-term,” Strudwick says. “A lot of our growth also is driven by emissions controls around the world.”

For many industries, demand for portable power is on the upswing for a variety of reasons. Commercial plants, for example, Fetting says, must do regular maintenance including the electrical panels to qualify for better insurance rates. Instead of shutting down the facility, the plant can rent the generators needed to power the facility while the maintenance is going on.

Large events, like the Summer Olympic Games in London, outdoor concerts and more also require portable power. So do oil and gas rigs as well as temporary housing facilities.

Fetting says a newer trend these days involves companies buying or renting mobile power systems to leverage capital instead of installing a standby product at every location. By having one larger unit centrally located with docking stations at other facilities, power can be moved to where it is needed.

“Some energy companies are looking at what happened in Japan and realizing something similar could happen to their power plants. Instead of having the generators right beside the plant where they also might be damaged in a disaster, they are putting in multiple docking stations with 2 MW units and then buying mobile products that would be enough to power up a nuclear power plant. This is an example of a relatively new market for mobile units,” he says.

The power solution systems offered by Cummins Power Generation can run from 60 kW to 30 MW, like those needed to power deep water wells in Saudi Arabia.

“It can be like building with Legos. You can buy 1 MW at a time, put them together and have a 40 MW power plant,” Strudwick says.

The company manufactures diesel, lean burn gas and spark-ignited generators as well as weatherproof enclosures and power boxes for power projects. They are experimenting with hybrid solutions, particularly for the telecom industry, using solar, wind and other energy sources that can be combined with a conventional generator.

What’s different about Cummins Power Generation, Fetting says, is that the company can supply all of the needed equipment and backs it up with aftermarket service.

“We have components, engines, alternators, air handling, air delivery and turbochargers, and at the next level, we have all the applications and engineers who can customize to build the applicable system. From the solutions side, it is how you pull it all together. Then a big piece is aftermarket. Nobody can really compete with Cummins. Rental companies are often surprised when they ask, ‘What do I do if this happens?’ because the answer is to call Cummins and we come out, fix it and under warranty there’s no bill,” Fetting says.

The company also has invested in research and development to build equipment “configured for the rental power market.”

What that means, Fetting says, is building a “more robust machine that can endure bouncing down the road. It’s different from a generator that is stationary or used only for standby power. We build our mobile product on a separate assembly line because it has additional requirements from those of a standby generator. For the rental market, you also have to have selector switches, and you have to secure all load cable and wiring harnesses.”

Another key feature, he says, is making the mobile products quieter. To do this, Cummins invested in its own Acoustical Testing Center, which opened in 2011 adjacent to its main production facility in Minneapolis. The building, larger than many sports arenas, has two separate testing rooms and is considered to be the largest engine testing facility of its kind in the world, able to test generators up to
3.3 MW using any type of fuel.

“In rental, you don’t know where the product will go, so you have to make it quiet. We have made the investments and we have done a lot more testing on sound levels to make our products smaller and quieter. For example, our insulation today is twice as effective and half as thick as what we used to use, but you never know if you can do that until you have a place like we have to really work on it,” Fetting says.

Leveraging staff members

While rental is one of the fastest growing segments within Cummins Power Generation, having tripled sales each year for the last two years, it is made up of a small group of Cummins executives.

Larry Fetting, general manager, Americas rental segment sales, has been with the company for 23 years. He switched to the rental segment when it was launched in 1999.

Scott Strudwick, business director, global rental segment, has been with Cummins for 22 years, starting in the U.K. in engineering before moving to the United States 16 years ago and eventually joining the rental segment.

“We leverage the sales channel, manufacturing facilities and everything else. All our business lines leverage the same people,” Strudwick says.