Open for bids

Auctions not only offer lucrative tools for asset management, but also perhaps even professional partnership in conducting your equipment business

By Mike Anderson

It may be April Fool’s Day, but the movement of construction equipment on this day is certainly no joke.

April 1, 2010 is, after all, a Thursday … and that means iron users, sellers, buyers and speculators from Lima, Ohio to Lima, Peru, from Dubuque to Dubai, are watching their computer screens flash back at them every time a member of their industry brethren clicks a new bid on a ripper-equipped chunk of earthmoving beef otherwise known as a 2002 Caterpillar D8R II dozer. The granddaddy of Internet equipment auction companies, IronPlanet hosts a live “Featured Auction” at least each Thursday, when hundreds of excavators, wheel loaders, pavers, dump trucks and other types of construction equipment, attachments and parts are up for bids. For mainline pieces of equipment, generally anywhere from seven to 10 are opened for bids at once, every six minutes, and each machine will stay on the board at a minimum until the next group goes live. Popular equipment will stay up for 15-20 minutes. The Texas-based Cat D8R II, requiring an opening bid of $110,000, stays open for bids for 24 minutes, drawing 39 bids, topped off by one for $174,000 by a bidder in Mexico.

“What we generally like to tell our customers, large and small, is that because IronPlanet does auctions every week, we can tailor the time of asset disposal to their needs, instead of forcing them to do it on our timetable,” says Paul Hendrix, IronPlanet equipment pricing analyst. “If a guy has a job completion on April 1, and the local traditional auction company doesn’t have another sale for 90 days, why would you want to have those assets sitting idle for 90 days? Or, as a job completion is progressing, with IronPlanet you could even sell three or four pieces this week, and five or six pieces in two weeks.”

That sure sounds like asset management.

Indeed, once most often considered among the “rogue” businesses of the equipment industry, auction companies are increasing part of the fleet management professional’s arsenal of tools … and perhaps even among his most trusted allies, advisors and confidants.

“Tuned in” fleet managers

A more informed market is a better market, says Ritchie Bros. Auctioneers’ Peter Blake, who credits private and public fleet managers alike for being “tuned in” to both the ever-changing status of their assets and the factors that affect the value of those graders, rollers and trucks. “People are just getting a whole lot smarter, with both more data available and more ability to assemble the data to make better decisions to help manage their businesses,” says Blake, chief executive officer of the world’s largest industrial equipment auction company. “People are starting to look a little more objectively at their fleets and making sure that they are getting the return they need and, if they are not, then what are their options.”

“Ours is very much a relationship business,” says Ritchie Bros. Auctioneers chief executive officer Peter Blake, seen here working the auction crowd himself. Sharing data with Ritchie’s customers only helps those equipment owners and managers make value-enhancing decisions on assets, he explains.

This, says Blake, falls right into the “mitt” of Ritchie Bros., the Vancouver-based worldwide auctioneering behemoth, which in 2009 alone sold close to 283,000 lots – or items – from 37,000 consignors, generating about $3.49 billion in gross auction proceeds. The company held 195 unreserved industrial auctions at sites in 14 different countries, drawing more than 330,000 bidder registrations, both on site and via the Internet. On-site and online registrants alike bid live on the gear that rolls across the famed Ritchie ramps.

“The one thing that we have always said internally here is that we don’t really control or perhaps even influence the issue of when somebody wants to sell something,” says Blake, pointing out that factors to be considered by sellers include equipment utilization and replacement. “For us, our job has always been the awareness that, if someone wants to sell something, then we are an option for them to utilize.”

For veteran industry observers Donnie Wiggins and Fred Darnell, the equipment auction as a tool for fleet management professionals has evolved from primarily a place for manage’s to disperse of assets. “On the acquisition side, I definitely think they look at auctions now more than they have in the past,” says Wiggins, general manager of Top Bid, a Randall-Reilly* business that publishes assorted traditional and online industry reference materials. The key is having buyers who have work ready to start, says his colleague Darnell, crediting the combination of a buyer’s immediate need with the availability of quality late-model used gear – the latter being what auction companies espouse in this era of reduced production of increasingly costly new equipment. “When somebody needs it, they are going to pay for it,” says Darnell, regional sales manager with Top Bid.

While setting up his table on site at a recent Louisiana auction, Darnell was repeatedly approached and queried about what he as an independent observer was estimating a specific piece would sell for that day. “There were four or five people there who undoubtedly had an upcoming job and needed that one particular piece of equipment. And they needed it right then,” he says. “How many people who are at the auction or on the Internet who need a particular piece of equipment or more for a particular job, that’s what’s going to determine your value.”

In this regard, the realms of the old-school auction yard and sit-at-my-desk Internet bidding are one in the same. “The very first guy who puts a bid on that piece, he owns it. Even if it’s for 30 seconds, he owns it,” says IronPlanet’s Hendrix. “We found that the more people we get on board with that little fleeting sense of ownership, typically the better the end result is. That’s just a market mentality, an auction mentality, that’s been going forever.”