Kohler Engines: Powering to a rental partnership

Editor’s note: Tom Cromwell, president, Kohler Engines, Kohler, Wis., spent the bulk of his career with Modine Manufacturing — a heat transfer company — before joining Kohler four years ago as president of Kohler Engines. Within the past year, he’s also taken on responsibility for the company’s diesel engine business. Kohler Co. is known worldwide for its kitchen and bath products, but the company, in an effort to bring electricity to rural America in the 1920s, patented the Kohler Automatic Power and Light — in essence the first home generator — which marked the company’s entry into the engine and generator businesses. The company has its primary gas engine manufacturing location in Kohler; its main diesel facility in Reggio Emelia, Italy; and other engine manufacturing facilities in Hattiesburg, Miss.; Chongqing, China; Reiti, Italy; Martin, Slovakia; and Aurangabad, India. The company started selling loose engines out into the market in the 1940s. In 2007, Kohler acquired Lombardini, a well-established diesel manufacturer based in Italy. Cromwell recently discussed the rental market, engine technology and innovation, and Kohler’s Rental Partner Program with Rental Management. An edited version of that conversation follows.

RM: How does the rental channel fit into Kohler Engines’ current strategy and what does rental mean to Kohler Engines?

Tom Cromwell: Kohler Engines is a leading global supplier of small engines into the industrial and commercial markets, but prior to about three years ago, we had not focused on rental nearly to the degree that we do now. We see the rental channel as a great way to get our products out to different end customers to let them experience the Kohler engine, understand the power and fuel efficiency, and the kind of service that we can provide. We believe we can drive growth not only in the rental channel, but even back into our core businesses by getting more Kohler Engine products into end-user hands through this channel.

RM: Why did Kohler create the Rental Partner Program and how does that work?

Cromwell: Rental yards provide products to a lot of our end customers. We strive to provide the best experience for our customers and, with more end users renting products, we felt the time was right to become an invested partner with rental yards. We will provide them with high-quality, long-running, reliable-starting engines. In addition, our extensive world-class service network ensures rental yards maintain their profitability and that end users have a higher level of satisfaction in their rental experience.

RM: How does that benefit rental stores?

Cromwell: It helps them control their costs by providing discounts on maintenance parts and engines, and control their inventory by stocking only what they need. They also have the ability to service their own fleet, and they are authorized to provide warranty repairs on their equipment. Labor is reimbursed for warranty repair and it gives them free online access to service literature, warranty information and marketing assistance materials. It gives them online access to illustrated parts lists and fast delivery with an easy online ordering system. There are additional rebates available for replacing competitive engines. There are freight rebates on short blocks, mini blocks and engines used for warranty repairs. It also allows for online warranty claims to expedite payment by check.

RM: What are the benefits of the program for Kohler?

Cromwell: We pride ourselves on being service-minded people and providing a gracious living experience for all our customers. The Rental Partner Program provides us an opportunity to penetrate into another market while giving our customers better pricing and increasing their confidence in us. We believe this program will enhance our brand recognition and our reputation in these markets.

RM: How do you measure the rental store’s involvement with Kohler once they’ve signed onto the Rental Partner Program?

Cromwell: Ultimately we’ll measure that by the number of engines we sell into the rental market, but we are trying to have a program that is active and ongoing. We’re sending mailers back and forth, and e-blasts, so we are trying to have a regular dialogue with these partners. It’s an active program, so it’s not that you sign up and then just fade into the woodwork. We’ll continue to track this and try to keep these partners engaged.

RM: Can you talk about the company’s strategy at The Rental Show and whether it was successful?

Cromwell: At The Rental Show, we’ve had several successful programs over the years where we have worked with OEMs to increase the presence of Kohler Engines on their equipment. We also have provided rebates on end products to drive Kohler Engine sales. We’ve had a number of people redeem their rebates and the intention is to give a person that great experience with a Kohler engine — to see how well it fits on these different products. The partners we have — the OEMs — we want them to see the performance and the fuel economy, and the end-user benefits that come from our engines. With that, we think we’ll see repeat business, long-term adoption and market share increase of Kohler Engines.

RM: How is the Kohler brand perceived in the marketplace and how do you think it should be perceived?

Cromwell: We have a very good legacy and history for commercial engines in general. We are the leading provider of small engines to gasoline-based welder-generators and fuel-efficient commercial landscaping equipment. Historically, we did not have an internally produced engine in that small single-cylinder horizontal product offering net 6 to 14 hp. That has been a change for us over the last three years and that has made us much more focused on the rental segment. The introduction of our non-DPF [diesel particulate filter] KDI engines gives us a bigger diesel offering with specific pieces of rental equipment. That combination of factors makes the rental channel much more important to us, much more attractive to us, and I think will allow us to continue that perception and legacy of great innovation, fuel efficiency, and durability and reliability of our engines.

RM: You’ve exhibited at The Rental Show for a long time, yet the company wasn’t a big player in rental. How has that changed in the last five years?

Cromwell: Since the introduction of our small single-cylinder, horizontal 6- to 14-hp engine portfolio, we’ve made great in-roads, but to be clear, in the rental channel there are a lot of people, as you understand, in that value chain. The OEMs have to believe you’re the right engine partner, the end user has to want your product and then the rental yards also have to want your product. It’s a more challenging channel than a lot of other markets where we go straight to the OEM or straight to the end user. There are more links in the rental chain and it has been more challenging to gain access than in some of the other segments. Kohler is a long-term focused company. Kohler Engines is about winning the game over time. We don’t have to win penetration overnight. It’s about one by one, having people have that great experience and enjoying their Kohler Engine. We’re having good success. We’re on the path we expected to be on and we see that continuing.

RM: Is the focus more on getting rental stores to buy Kohler as replacement engines or ask for Kohler engines from OEMs?

Cromwell: Ultimately it is both. Our entry has been more about replacement engines and getting equipment re-powered with Kohler engines, but that focus was more about giving the end user a good experience with a Kohler engine, which ultimately we believe will cause them to ask their OEM partners for Kohler engines on the new equipment coming into the store.

RM: Has any of your concentration on the rental marketplace been outside the U.S. and Canada?

Cromwell: Yes. We are a global engine supplier and we are focusing on the rental market from Latin America, through Europe and China.

RM: What is the delivery time for different engines?

Cromwell: It really does depend on the type of engine. We pride ourselves on being responsive and quick delivery is a core value for the company. We buffer some small gas engines here in North America, depending on quantity and those types of things. Generally we would deliver those engines inside of 30 days. Now for large diesel engines, the bulk is produced in Europe, so for a fresh order with no advance notice, a typical lead time would be 90 days. Again, we carry a buffer here in North America. We stock some standard engines and certainly if we have a relationship with an OEM, we would direct ship from Europe to that OEM, but we also would hold some stock here as a buffer to help them manage short-term spikes in demand.

RM: What are the chief concerns for Kohler Engines today? Is there anything that keeps you up at night?

Cromwell: Many of our markets are seasonal and cyclical. As a company, we need a long-term focus and the ability to weather some storms. Kohler Co. has that strength and we tend to be a long-term focused company. Yes, we want to win in the short term, but we understand the seasonal nature of our markets. If you look at this year, here in North America it was shaping up to be a very good year in the lawn and garden segment, but then that cold, late spring here in the U.S. delayed the selling season and will certainly limit the overall growth in that market this year.

The other thing is the global economy continues to struggle in certain regions. Obviously Europe has been a huge challenge over the past couple of years and that inevitably affects the whole industry.

Offering innovative engines in many different product lines in many different regions certainly helps to insulate us from that. While one market might be down another market is up. While one region is down another region is up. Certainly Asia has been beneficial to us over the past couple of years to help offset some of the slowdown in Europe.

RM: What do you hope Kohler Engines accomplishes over the next three years?

Cromwell: Certainly growth and continued market share gain, which we believe we’ll accomplish through innovative products that solve customers’ problems better than anyone else, and because the products save them money, last longer and save fuel. It’s about fuel efficiency, durability and meeting emissions standards with the most cost-effective solution. In addition, we will need to continue providing great service to our customers and continue building deep relationships in the rental channel. We accomplish all of that through a great group of hard-working associates in our business.