When America's largest corporations seek professional help in relocating their executives, or if they rent a fleet of cars or trucks, many are turning to the PHH Group of companies.
Originally Peterson, Howell & Heather, after the men who founded the firm in 1946, PHH turned a relatively simple idea into a leading industry.
"Following World War II, cars were really in short supply," explains Jerome W. Geckle, chairman of the board and president, "and even if they could have gotten them, most companies chose to invest their money in activities which were directly related to increasing production. So, they saved a lot of money renting cars from Peterson, Howell & Heather."
In 1948, the company's investment in 1,800 vehicles was $2 million. By 1965, it managed 91,000 cars and trucks worth $230 million. And for fiscal 1981, PHH managed 213,280 vehicles valued at more than $1 billion.
General Electric, a major customer, leased 5,050 cars and trucks worth $43 million, at a cost to GE of $25 million. Honeywell, based in Minneapolis, leased a fleet of 4,380 cars and trucks for $25 million. Other major customers include Johnson & Johnson and E. I. du Pont de Nemours & Co.
Why would giant corporations lease cars from PHH instead of buying them? "Take a Du Pont," Geckle says. "It is much better for them to pay us, with thousands of employes who specialize in cars and trucks, than to use several of their key people worrying about transportation problems full time. They have other things to do, and we allow them to concentrate on them."
Geckle said that PHH, for a fee, helps its clients decide "who should get a car, what kind to get, how to service it. We even supply a booklet on maintenance in each vehicle. And we advise the client when they should replace their cars."
PHH owns no garage or dealership, and at least 99 percent of the cars and trucks it buys are American, from subcompacts to the luxury line. (A Rolls Royce is among PHH orders, although Geckle will not say who drives it.)
Nationally, PHH commands 29 percent of the market in firms renting cars and trucks, which is slightly ahead of its nearest competitor, Gelco Corp., with headquarters in Minnesota. The third-ranking firm, Wheels, holds a 14 percent share.
"Remember, auto leasing is a value-added business," points out Andrew J. Melnick, who follows PHH as director of research at New York's L. F. Rothschild, Unterberg, Towbin. "And, by definition, that means a firm must provide a worthwhile service to a client, which the client believes isn't worth doing himself. And PHH performs their services very well." Melnick believes that in its auto and truck leasing segment, PHH has great opportunity to expand.
"Even though PHH and Gelco are the leaders in the field," Melnick continues, "there are thousands of potential customers out there to be reached . . . Instead of leasing 200,000 vehicles, PHH could probably do millions."
Beside leasing vehicles, PHH also supplies diesel fuel to businesses. Through its acquisition of the National Truckers Service of Fort Worth in 1968, PHH now supplies 190 million gallons of fuel to 1,200 affiliated truck stops nationwide.
Also a major facet of PHH is its executive transfer division, Homequity. Last year, the division sold 16,300 homes and was involved in the transfer of 34,000 company employes.
"We have 2,300 employes, and they're either experts in real estate or vehicles," Geckle says proudly. "And when a company wants to move a top executive from, say, Washington to Los Angeles, and they want him there tomorrow, it's much less trouble to pay us than for the firm to do all the work itself."
For a fee averaging between 15 percent and 18 percent of a home's assessed value, PHH sells the house for its client. Usually, after paying the brokerage and settlement fees, PHH realizes a profit of around one percent on each house.
Once PHH sells the house, the employer realizes any profit resulting from selling the property above its assessed value. On the other hand, any loss resulting from selling the house below assessed value is made up for by the client.
PHH holds a 32 percent market share nationwide in its executive-relocation division, followed by Merrill Lynch's 28 percent share. Sears, Roebuck & Co. is a distant third. "We minimize the headaches of their top executives when they move, and I might add, we do our job well," Geckle says.
Melnick agrees. "All you have to do is look at the record. PHH's growth proves that it must be doing something right. Even more than in its vehicle-leasing business, PHH leads the field in relocating executives." But Melnick believes there is a lot of ground that PHH could, but isn't, covering in this area, too.
"In a given year, there are a quarter million executives relocating around the country, and PHH is helping fewer than 10 percent of them. Again, they have to go out and penetrate the market more extensively."
Melnick believes that, given the depressed national real estate market, coupled with high interest rates, PHH should do even better this fiscal year than last.
"It's pretty straightforward. If it were an easy market, who would need a PHH? But of course it isn't, and that's where their expertise comes in. A company can't, or won't, bother dealing with all the complicated financing arrangements which are possible. Instead, it'll turn to PHH."
Current figures show that many corporate clients are seeking help from PHH, making PHH a profitable firm in part because of the recession.
In 1981, its net income was $22.6 million ($1.63 per share) on revenues of $395.8 million, compared with 1980 net income of $16 million ($1.25) on revenues of $280 million. For the three months ended Jan. 31, 1982, net income was $7.5 million (49 cents per share) on revenues of $111 million, compared with a net income of $6.3 million (43 cents) on revenues of $93.6 million for the same period in 1981.
Some experts believe PHH should broaden its line of business. Executive search and temporary help services are offered as suggestions. Four years ago, PHH did begin selling its services to firms whose executives chose to rent, rather than sell, their homes.
Gulf Oil, for example, uses PHH for employes who rent homes while transferred abroad. "That's a good deal for the executive," Melnick observes. "Since he doesn't sell, there's no capital gains. But I don't see PHH expanding widely in this area or into some of the others which have been suggested. They should stick to the two principal areas where they have such a great track record."