Going Forward: Challenges and Changes in the Towing Industry

On June 1, 2020, Harold Markle, the founder of Canadian Towing Equipment (CTE) retired after nearly 50 years in the towing and recovery industry. Markle, an International Towing & Recovery Hall of Fame & Museum inductee (1986), sold his business to Commercial Truck Equipment in 2017, and it was long-time CTE employee and General Manager Dale Hartung who stepped in to run the company as president.  

CTE is a trusted name. With two facilities (Ayr and North York, Ontario) and decades of experience supplying towing and recovery vehicles and equipment, CTE has been servicing the industry in North America for over 30 years. Given the depth of the company’s roots, we asked Dale if he would kickoff Tow Canada’s inaugural Supplier’s 360°, a forum dedicated to service professionals whose business it is to understand and respond to industry trends, opportunities, and challenges.  

Tow Canada (TC): Dale, can you tell us how you got started at CTE? 

Dale Hartung (DH): I am in my seventeenth year here. I came from the truck dealership industry, and I wanted to use those skills but with a different challenge. The towing and recovery business is more customer service focused and customized, and it involves such a diverse group of people. 

When I first started at CTE, I started as the parts manager, and I went on to be the general manager. I just kept on taking on a bit more responsibility, and when Harold started preparing to sell the company, I was appointed as president. When Commercial Truck Equipment bought us, they wanted somebody that would carry on and lead the company, somebody that would treat the business as their own. 

TC: How has business changed in the last few years?  

DH: I think it is more than just business that has changed. I think everything, every facet of life has changed since Covid. There is some positive change, and other things I don’t consider so positive.  

TC: What has been lost? 

DH: Structure—I think structure is the biggest thing that is missing. I had a conversation last week with a teacher and she said, “I’m just so tired of when something doesn’t go right, people just say, ‘ever since Covid,’ and that’s how they start off, with excuses.” There’s no accountability. Nobody wants to say, “Know what, I didn’t work as hard as I should have. I am sorry I didn’t meet that deadline.” 

People got out of routine, and now that’s an excuse. I think a lot of personal ownership is gone when it comes to taking responsibility for things that did or didn’t happen. It’s just a different environment.  

Even now, in-person business is not back to the level that it was beforehand, and this has nothing to do with people not feeling safe because of the virus. People adapted to a new routine of fewer in-person sales, but when we are doing it, we see huge value in it. The value of personal contact has not changed.  

TC: What do you think the towing and recovery business owners need to pay attention to now? 

DH: Fleet planning—we’ve had many customers come in not realizing that lead times are what they are, so they are scrambling. You don’t make the best choices when you’re scrambling. You’re buying something because you need it, not necessarily because it’s the best piece of equipment to meet your needs. You need to be thinking now for later. 

TC: Are people still walking in expecting to get what they want now? 

DH: There are still a few people walking in like that. All along we’ve tried letting customers know that there’s a shortage. In the past, we’ve always just had product available and inventory on the ground. Now, if somebody’s coming in looking for a new vehicle, and they’re not in the queue, they could be waiting until the summertime. 

TC: How is this affecting parts, service, and sales?  

DH: The parts supply chain is starting to become more stable again. There’s still some uncertainty. Where I really feel bad for people is when it comes to unplanned purchases, when someone has a truck that gets into an unfortunate accident, or it comes to its end-of-life cycle sooner than planned. All of a sudden, they need a truck to carry on their business. We had a customer last year that had a fire in his shop, and he lost his trucks. Luckily, he already had one on order with us, so we were able to scramble and get it done for him sooner than later. Thankfully, the industry rallied around him as well to help him stay in business until he could figure things out. 

TC: How is the demand for pre-owned vehicles? 

DH: The market is still strong because of the new truck shortage. There just isn’t much available. Demand is high. So that’s driven up prices on used trucks. We’re selling used trucks at a price that is surprising if it is good quality stuff.  

TC: What else should people be planning for? 

DH: People need to think more about succession planning. We are seeing our core group of customers getting older and older. In some cases, the second generation doesn’t want to step in, be on call 24 hours a day, and everything else that goes with it. So, I think that’s one of the things that a lot of companies are probably really looking at, what’s the next step? A lot of our customers have sold out, and we’re seeing some buying groups with some of the auto clubs and trends like that. 

TC: What is motivating the auto clubs? 

DH: I feel the auto clubs want to deal with fewer companies. They need coverage, so they’ll set up somebody that’s growing or wants to set up brokers. So, they are adopting the business model that a lot of truck dealerships now have. The number of dealerships hasn’t changed, but there’s fewer owners, and towing is going that way.  

TC: It seems consolidation is growing everywhere. I was just reading about the Commercial Groups of Company’s acquisition of Euroway Industrial Service Co., a Winnipeg-based truck equipment service and installation provider. 

DH:  What that acquisition did was allow Commercial to provide towing equipment and service in Winnipeg. If you take a look at the size of Winnipeg, or even the province of Manitoba by demographic and total population, would it be enough to sustain a tow truck supplier? Probably not. It’s a big province, but it’s not that populated. So having an actual tow truck supply company in Winnipeg wouldn’t make financial sense unless a group like Commercial with various product lines comes in to serve the region.  

TC: So you see consolidation as a positive thing.  

DH: Yes—think in terms of competitiveness. It comes back to what we talked about with the OEMs. They want to deal with one person. So if you say, hey—we are buying 10 widgets each, and as a group of say three or four companies together, we’re buying 30 or 40 widgets in total. So maybe we can stretch a bit and together buy 50 widgets and see if we can get a better price and pass that savings on to customers.  

TC: Any other advantages of consolidation?  

DH: Basically, you’re able to leverage. We buy several trucks from one OEM, and it’s a majority of our market, so on certain components we get an extended warranty that a single dealership would not be able to get. The company gives us an extended warranty because we buy so many as a group. We’re able to pass those savings along to customers.  

TC: And then there is the accessibility issue. 

DH: Like I said, it probably would not make sense to have a dealership in Winnipeg unless you are able to piggyback it onto something else. But without a towing supply company, customers in Winnipeg would have to pay more freight to get what they need. And if they did buy a piece of equipment and needed warranty work or service, they would be forced to either stop business and do it themselves (if they were able), or they would have to take it somewhere and spend money driving to some place like Regina to get it done.  

TC: How has inflation, the rise of operational cost, and supply chain issues affected the sales and financing of towing equipment? 

DH: We see sticker shock, and this ties into what we spoke about earlier in terms of the long lead time for equipment. Right now, we’re delivering equipment that we sold a year ago. So if a customer came to us last year and thought their payments were going to be this many dollars per month, and now that the truck is done, and in some cases surcharges and price increases have been added, and with an interest rate that is now higher than it was before, the monthly payment that they thought they were comfortable with is now substantially higher. And some people just can’t understand. It can affect trust. It is just the timing of it all. 

TC: Have customers changed?  

DH: Yes, customers are a lot more educated now. People can research something at the touch of a tablet. So when they come in, they generally know the specs of the vehicle just as well as the salesperson, and that wasn’t always the case. Now, they’ve already seen that product on whatever media they’re consuming. And often, we find that customers come in just to see if you will talk them through their idea. They already have pre-preconceived notions about the truck they need. They just need either some positive or negative reassurance. 

TC: Given the challenges with acquiring and servicing equipment, what are the three top pieces of advice that you would give an owner? 

DH: Number one, they should be concerned about maintenance. We see it time and time again, trucks that are under maintained. We had a truck in our repair shop here last week that was nonfunctional when it came in, and there was not anything broken on it, it just hadn’t been maintained. It was seized up to the point that it was nonfunctional. 

TC: What was the problem? 

DH: It just had not been greased, and it was not a very old piece of equipment. With tow truck operators, maintenance often seems to be a secondary concern. If you take a look at excavation companies, and equipment like a hoe or an excavator, they grease it every day. Before that operator starts, he walks around with a grease gun and hits the points of movement. Where with tow trucks, the attitude is like, “Well, you know, the next time I do the oil change in three months I will give the truck a grease job.” And whether it’s our equipment or competitors’ equipment, the maintenance intervals are much shorter than that. It’s just that they don’t address it.  

TC: What is your second piece of advice? 

DH: Plan on what you need well in advance.  

TC: And number three? 

DH: Some of our customers need to look more at driver accountability. We’re in the used truck business as well, and when we see some of these trucks that get traded in, and they’ve just let their drivers do whatever the heck they wanted to these trucks, they’re now going to lose trade-in dollars because of it, which is tied into the maintenance as well.  

This issue probably stems from trying to find employees, which many industries are having difficulty with right now. So if you have somebody that wants to do the job, and you put them in there, and if you can’t find anybody else, you feel like you’ve got to keep this person. But if they’re beating your equipment up, what else are they doing to jeopardize your business? 

TC: This brings us back to the issue of accountability. Is it ignorance or laziness or something else? 

DH: I think it’s simply that the equipment is not theirs. Some people treat the company that they’re working for like their own company, but there’s other people that have some resentment, but they need that paycheck, and they don’t care about the company’s success. Or sometimes they see that the owner is driving a new vehicle, and they’re not driving a new vehicle, or they think the owner is making too much money, but they don’t realize the sacrifices that the owner has made to get there. 

TC: What other challenges should tow company owners prepare for?  

DH: Provincial licensing and training—this is something that people in the industry need to get their heads around. I am not an expert here, talk to the Professional Towing Association of Ontario (PTAO). If you want to be a part of this industry, you need to get to a certain level [of standards]. Now there is a cost involved with that, and people need to understand that. When you show up in a beat-up truck that isn’t safe, or it’s not licensed properly, or it’s not insured properly, or you haven’t invested in the right equipment and training—you haven’t invested enough to be representing the business in a professional way.  

TC: How is CTE dealing with labour attraction and retention issues? 

DH: We have a lot of long tenured employees and have attracted new people to support our continuing growth. Since Commercial purchased us a few years ago, there haven’t been any drastic changes. In fact, Tracy, Harold’s daughter, is still our controller, and when it comes to staff, we have the same mentality. If they need time off for appointments or to take their kids to school, when it comes to things like that, we’re understanding.  

TC: Finally, do you think Harold would recognize the company today? 

DH: One thing that I really respect and give Harold credit for is when he sold the business, he wanted to make sure that it was going to be the right fit for the employees that were here. So, when Harold sought a partner to purchase his company, he was thinking of the next generation. How he approached the sale was a real testament to him and how he built this business. He knew that it wasn’t just him that built the business. It was also his employees. He wanted that mentality to continue, and he wanted his legacy to continue. So hopefully we’ve done that for him.  

*Tow Canada would like to thank Dale Hartung for taking the time to share his insight for the benefit of our readers. 🍁