Tulsa tower

March 1, 2002
FOR a guy who supposedly didn't know the difference between a reefer and a flatbed when he arrived at Utility Tri-State Inc in Tulsa, Oklahoma, in 1992,

FOR a guy who supposedly didn't know the difference between a reefer and a flatbed when he arrived at Utility Tri-State Inc in Tulsa, Oklahoma, in 1992, Jeff Smith has taken on the aura of an industry giant.

He guided the company through a tornado-induced plant reconstruction, added branches in Oklahoma City and Fort Smith, Arkansas, presided over a 60%-a-year growth spurt during which the company went from $2.7 million in total trailer sales in 1993 to $45 million in 1999, and is steering it through the economic downturn that has crippled the industry.

The National Trailer Dealers Association noticed and made him one of three finalists for the 2001 National Trailer Dealer of the Year Award.

To Smith, his ascension is not a big deal. The way he describes it, the story is quite simple. He was working as a tax accountant at Coopers & Lybrand, successfully navigating the corporate ladder without experiencing the kind of fulfillment that should have been accompanying that climb. He says he was a “fish swimming upstream.” He was proficient at his job, but lacked the self-worth he knew he could get from a larger challenge.

One of his clients was Ronnie Jett, Utility Tri-State's owner, with whom he had fashioned a close rapport.

“I asked him one day, ‘Hey, does one of your rich buddies need me to run their business? I've had enough of this tax accounting,’” Smith says. “He said, ‘Why don't you come here and run this one?’ About a month later, I was here.”

Smith obviously had a comprehensive knowledge of the company's struggle to find financial stability. It didn't scare him. His goal was to own something — anything. It didn't have to be a trailer company. His relationship with Jett steered him toward Utility Tri-State. He wanted a stake in making it better.

“I didn't really do any due diligence on the industry itself, or as much as I should have about what manufacturer he represented,” Smith says. “I could have just as easily come to work for a Fruehauf dealer. And about three years later, they filed bankruptcy, so thank God I went to work for a Utility franchise.

“I had asked what kind of reputation they had and what kind of market share they had. Nationally, they had a great market share in refrigerated trailers, yet locally we did not sell anything to speak of. I said, ‘If we're doing our job, we ought to be able to sell some.’ I knew we sold a good product. It was well-recognized. But the industry was in the doldrums at that time. And the company had a history of losses and a negative net worth. It was kind of a sink-or-swim situation. Jett had some personal wealth, and he was going to buy us a little time. We were a classified loan at the bank and owed them half a million dollars. I don't think I realized what a desperate situation it was when I first came out here.”

In his first month as vice-president, he didn't exactly take on the appearance of an executive. He was out on the facility's five acres, taking a weed-eater to the unsightly tangle of grass around the perimeter, trimming bushes, cleaning the interior. His salary was $600 a month, plus 49% ownership of a business that had lost money in the three previous years. His family was basically living off the income of his wife.

Scary? Well, he had a safety net, but he had no intention of using it.

“When I left Coopers & Lybrand,” he says, “they told me I could come back if I changed my mind. One of my driving forces here was that I didn't want to go back to them and tell them that I had failed. So we worked ridiculous hours, trying to get this thing going. But it was all fun. It didn't seem like work.”

And then Utility Tri-State was flattened.

Tulsa is situated in “tornado alley,” a place where freak storms can materialize quickly and execute their fury with a vengeance.

That's exactly what happened on April 24, 1993, almost a year to the day that Smith joined Utility Tri-State. Smith was at the facility until 4:30 pm, leaving to join his family at his home but intending to come back at 8 pm to meet a customer who was picking up a trailer. Just after 6 pm, a tornado with a 250-yard swath tore into the facility, then jumped across Interstate 44. Nobody was in the facility at the time, but the tornado ultimately killed seven and injured 100 in the Tulsa area.

“I don't see how anybody could get hit any worse,” Smith says. “We didn't have a standing fence. We didn't have one thing that didn't get totally demolished. We saved some parts, but it was basically like selling every asset you own to insurance …”

“Like that!” he says, snapping his fingers to emphasize the seconds it took for the tornado to destroy Utility Tri-State.

Fortunately for Smith and Jett, they had business-interruption insurance. They were back in business 90 days later. They rolled up their sleeves and went to work, performing jobs out on the pavement. A month later, the facility was completed — smaller than the original, and with fewer employees. Two months after that, they were fully operational.

Some parts and service customers had to go elsewhere in the interim, and never returned. Trailer sales were not impacted at all.

Becoming Sole Owner

A year later, it became obvious to Smith that if he wanted to take the company where he felt it needed to go, he had to be the sole owner and president. He wanted to grow the dealership and expand, whereas Jett was at a different stage in his life and, Smith says, “wanted to protect assets and not invest and take chances.” So Smith bought Jett's 51% stake.

“He's the one that gave me the opportunity, and he remains a close friend,” Smith says. “I'm very grateful to him.”

That was the beginning of Utility Tri-State's upward surge. By the end of 1994, it had tripled its revenue in trailer sales over the previous year, going from $2.7 million to $8.6 million, and doubled its net income. Although the trailer sales growth in the next two years wasn't as dramatic — to $10.2 million and $13.3 million — it surged to $23.6 million in 1997 and $31.5 million in 1998.

“Having a good head for business, he learned the trailer business fast, and he learned it well,” says Ralph Campbell, a mechanic at the Tulsa shop for 23 years.

Smith says his accounting background helped, because “accounting is the business language,” and being without it would be “like being in Paris and not speaking French.”

He knew the company had to not only cut costs, but also increase revenues. He was instrumental in cutting overhead when he first arrived, since he handled the accounts payable and accounts receivable, served as controller, and handled the monthly financial statement.

“The one thing that accounting does teach you — at least in a public accounting firm like I worked in — is you do whatever it takes, no matter what it costs or how long it takes, to get the job done for your client,” he says. “That fundamental business principle carried through into this business. Do whatever it takes to get the job done. Our customers do that every day.

“Accounting helps you understand the numbers side of the business. But I think the people side of the business is a lot more important. I kind of view it like this: Accountants are the score-keepers on the sidelines. They're not the quarterbacks on the field. You need them, but they're not the ones out there creating jobs and revenue. They're parasites, to quote a friend of mine who is an accountant.”

What He Learned

Smith says life's lessons have been far more crucial in his philosophy of guiding Utility Tri-State.

From his father, a junior high school football and basketball coach, he learned the value of unselfishly performing a role on the team and pulling together to accomplish a goal that couldn't be achieved individually, of encouraging teammates, of adjusting his mindset to accommodate the variety of temperaments and belief systems.

Smith was able to immediately create an atmosphere where employees felt appreciated. One of the first things he did was improve the working conditions in the service area. He moved a noisy air compressor outside so employees could communicate without shouting, then installed air lines around the entire shop to provide air pressure.

Then he organized a voluntary cleanup party to rid the plant of excess junk that had accumulated over a five-year period. He wanted drivers to pull into Utility Tri-State's lot and feel like they were visiting a successful business, not a bad junkyard. (Because, as he notes, “good junkyards are organized.”)

“I said, ‘I can't pay you, but I'll feed you well,’” he says. And he did, providing a sumptuous spread from one of the city's best barbecues.

Smith started providing uniforms, health insurance, paid vacations, a quarterly bonus program for employees (those who have been with the company for more than one year have an ability to share in its profitability), and a payroll-deduction retirement plan that includes an employer contribution at year-end. The idea was to instill a sense of ownership, to give them incentive to make the dealership more profitable.

Employees began to understand that he truly cared about them. Mechanics knew that they were just as important as the sales personnel.

The Personal Touch

The day after the terrorist attacks, Smith stood in the reception area, surrounded by everyone who was working at the time. He described how a good friend of his mother-in-law had lost her son, who worked on the 86th floor in one of the World Trade Center towers.

“Tell the folks who mean the most to you how much they mean to you,” he said, “because life's precious. You're never guaranteed another minute. Treat it like it's a gift.”

It was a passionate, eloquent message — the kind of thing that would not be found in an environment where the owner is a distant figure.

“I can say that Jeff is by far the most wonderful person for whom I have had the pleasure to work,” says Sherry Donohue, his personal assistant. “He has come to my rescue more than once, and I know that should I need him in the future, he will be there. That is just how family is. … In my book, he is ‘Man of a Lifetime.’”

It extends beyond his employees to his customers.

Smith says most of the fleet customers have been on the leading edge of equipment needs and innovations (i.e., hi-cube reefers, knurled flatbed floor, etc.), which has inspired the company to be a problem-solver and to cater to new needs and ideas.

He has taken existing and prospective customers to factories to view the production process and quality of Utility Trailer Mfg Co's product, including discussions with plant management and corporate production staff.

When one of Utility Tri-State's customers wanted a knurled aluminum floor to reduce driver injuries caused by slipping on a wet aluminum floor, the company worked with Utility's national office to develop a suitable floor. Then there was the reefer customer who needed a floor that would accommodate carts without getting stuck in the duct floor. Working with that customer and the national office, Utility Tri-State developed a new extruded floor. Smith says his company was among the first to request the manufacturer to provide a high-cube reefer product to meet customer needs. When water absorption became an issue to one reefer customer, Utility Tri-State developed specifications to reduce the insulation's exposure to water absorption.

“There is a definite can-do attitude in each of the locations,” says Robert Conlee, director of dealer relations for Utility Trailer Mfg Co. “Jeff and his team have brought new ideas into the marketplace and are indeed dominating their market today.”

Staying The Course

Arkansas Trucking Association president Lane Kidd has seen how declining freight volumes have had a ripple effect through the trucking industry, forcing companies to downsize their capacity and causing tough marketing problems for the businesses that sell products to them. What he hasn't seen is Utility Tri-State engage in the common practice of “cut and run,” cutting customer support staff and marketing programs. He says Smith has “stayed the course.”

“His company has a loyal following among trucking companies,” Kidd says. “I think this in large measure is due to Jeff's determined philosophy that maintaining the same level of service in both good and bad times will pay off in the long run. While representatives of truck and trailer dealerships have been few and far between at recent industry meetings, Jeff and his company are consistently there to sponsor events, host dinners, and generally support their customers and the industry.”

Smith has diligently developed deep-rooted relationships that go beyond the timely delivery of a trailer or the completion of service as promised.

Says John Christner of John Christner Trucking Co in Sapulpa, Oklahoma, who has purchased over 400 trailers from Smith since 1992: “I think of his four children as if they are my own grandchildren. Jeff is a dedicated family man with religious and moral fortitude.”

Smith says there are other keys to the company's success:

  • He is ultra-competitive.

    In a profile in Oklahoma Motor Carriers Magazine two years ago, Smith was quoted as saying, “I treat this business like a competitive sporting event, and I want to win.”

  • He was the beneficiary of some luck.

    “We had a good economy for many years after I bought the company,” he says. “It cooked. A friend of mine once told me, ‘Don't mistake a bull market for brains.’ There were a lot of smart people three years ago. I'm not as smart as I was back then. I had good timing. I was very fortunate.”

  • He has Utility Trailer Mfg Co behind him.

He believes the company is solid and the product is highly regarded. He says he receives guidance, but basically is trusted to do what he feels is necessary.

“Utility doesn't really tell you how to run your business,” Smith says. “They may make suggestions from time to time. We don't tell them how to make trailers, and they don't tell us how to sell them. I think they're always willing to give advice if you ask, and I have asked several times. They're not really intrusive as far as demanding you do certain things. They also understand that what works for one dealer doesn't necessarily work for another. There are different market conditions.”

Smith doesn't necessarily embrace the notion that his company is successful. In fact, he has adopted the mindset that the company is not successful and that steps need to be taken to be successful.

“I think the people who are comfortable in this business get their butts kicked pretty quick,” he says. “We could do a lot better job. It's not like we sit around and pat each other on the back on how good a job we've done.”

That's why the Trailer Dealer of the Year nomination made him squirm a bit in his seat.

“The positive is that you gain some good recognition with people you are currently not in business with, and it gives you credibility that you are a reputable company and you try to do things right,” he says. “But the thing that scares me is that people you're currently doing business with might be thinking, ‘Who does he think he is?’”

Weather Downturn

The challenge for Smith — as it is for just about everybody in the industry — is to weather the economic downturn.

To increase the equipment sales customer base — which totals 113, including 29 fleet accounts and 17 industry accounts — Utility Tri-State has relied less on referrals and association contacts and more on cold calls. Those range from the traditional trucking customer base to non-traditional customers like furniture stores and energy companies.

To maximize on the company's return on investment, Smith is fully utilizing all of the dealership assets.

“In a time when equipment values are depressed and sales are slow, our approach is to keep equipment inventory levels — and related market exposure — at a minimum,” he says. “This may involve taking losses on some pieces of equipment. However, if the down cycle is expected to be long, we believe it is better to take our medicine easily, turn our equipment into cash and use that cash in areas that generate a greater return than idle equipment inventory. In down cycles, customers still need repairs and parts, so we concentrate on those areas of our dealership to generate the profits of the company.”

Although the company's total trailer sales were down 28% in 2001 over the year before ($27.5 million to $19.7 million) — still well below the industry average of over 40% — parts sales were up 22%. The huge difference between the gross margin for trailer sales and for parts and service allowed the company to increase its net income 30%.

Dealing With The Downturn

Smith says his approach is to remain liquid whenever possible. With reduced factory backlogs and increased defaults, he decided not to order any additional stock trailers and pondered options to reduce the existing new and used inventories, which allowed the company to avoid a large decline in market valuation. He also tightened credit policies to minimize the company's exposure to uncollectable receivables.

His five-year plan is to add a fourth location to the company. The current setup: Tulsa has five acres, 23 employees, and an average inventory of 12 new trailers and 23 used trailers; Oklahoma City has 2½ acres, six employees, and an average inventory of four new trailers and five used trailers; and Fort Smith has 8½ acres, 14 employees, and an average inventory of 10 new trailers and 15 used trailers. Oklahoma City and Fort Smith both offer service and parts sales.

“There were times we questioned whether service and parts were worth the hassles, with issues of work comp and service liabilities,” Smith says. “But today, I don't care how good a trailer salesman you are, if people aren't buying, you're not going to sell them trailers. It's a four-legged stool for us, because we also do some renting of storage trailers and over-the-road trailers.

“I think it's very important to have those abilities to help weather these downturns in the buying cycle. The guys who have the portable office building and are just selling trailers, I think they're struggling. A lot of them have gone away. We've got a lot of challenges ahead of us.”

His 10-year goal includes: purchasing some of the company's leased property or buying new property in order to build a new facility; increasing the key customer program by developing long-term relationships with solid customers, which will enable the company to achieve long-term goals and fund them with profits and not debt. He believes that over the next five years, the trailer dealer market will undergo a consolidation that will result in “fierce competition” for the small and medium dealerships.

“If you're not concerned, you shouldn't be in the business,” he says. “We're always kind of nervous. We're going to be here. How large and in what capacity … that remains to be seen.

“The population is growing and the GNP is growing at a little bit faster pace than the population. Trucks and trailers are not going away. They still remain the best way to get things from Point A to Point B. But it's competitive. You have to stay positive and also understand that there might be opportunities that present themselves. The people who make it through this are going to be in a good position.”

About the Author

Rick Weber | Associate Editor

Rick Weber has been an associate editor for Trailer/Body Builders since February 2000. A national award-winning sportswriter, he covered the Miami Dolphins for the Fort Myers News-Press following service with publications in California and Australia. He is a graduate of Penn State University.