CapSource Hitches Ride with Hyundai in Mexico's Truck Sales, Lease Market

Boulder-based public company's revenues increasing

by S. Clayton Moore, Business Report Correspondent

Boulder, CO, June 10 (Boulder County Business Report) — CapSource Financial Inc., (CPSO.OB) a Boulder-based company founded in 1996, is taking advantage of the North American Free Trade Agreement to operate extensive truck trailer leasing, rental and sales operations throughout Mexico.

The company operates two subsidiaries that work together to capitalize on the tremendous growth of Mexico's cargo transportation needs.

CapSource owns and manages a lease/rental fleet of truck trailers and related equipment through Rentas y Remolques de Mexico. The other subsidiary, Remolques y Sistemas Aliados de Transportaction, manages the company's exclusive agreement to sell truck trailers made by Hyundai Translead, a subsidiary of the Korean engineering and manufacturing giant. In addition, Remolques also provides parts and service.

Although operating internationally is a challenge, CapSource Financial's President and Chief Executive Fred Boethling affirmed that Mexico is a land of opportunity.

"Since NAFTA was signed, trade with Mexico has increased from $50 billion to $250 billion per year. More than $650 million worth of goods cross the border every single day, and 90 percent of that cargo moves by truck. The transportation market, especially the trucking business, has just exploded," Boethling said.

He is quick to note, however, that there are certain aspects of operating internationally that are still unique.

"To be successful in Mexico, you obviously have to understand the language, but you must have a good grasp of the culture, the laws, the accounting and other administrative principles. Once you get there, it's a lot easier, you can't be intimidated by operating in a foreign country," Boethling said.

Boethling and his partners know something about challenges. At 60, he continues to compete as an ultracyclist and is in training for June's coast-to-coast bicycle ultramarathon, the Race Across America. The company's largest shareholder, Randy Pentel of RP Air in Minnesota, holds several aviation speed records including the U.S. perimeter speed record. The company's manager of Mexico operations, Lynch Grattan, is an active member of the American Chamber of Commerce in Mexico City.

"One of the strengths of this company is that we have a very strong management team that is experienced in international business:' Boethling said.

The company went public in 2003 and has grown by 100 percent per year, according to Boethling. It focuses not on the largest trucking fleets but on the mid-tier operators in Mexico.

CapSource Financial has a major advantage in its relationship with Hyundai, the only North American trailer manufacturer to receive ISO 9002 certification. Rentas y Remolques de Mexico gets trailers from Hyundai's ultramodern facility in Tijuana, Mexico and sells them through distribution offices in Mexico City, Monterrey and several other locations throughout Mexico.

"Hyundai has decided that it wants to become the dominant factor in the trailer market, and it is going to do just that. We are going to basically ride their coattails," Boethling said.

The company has had to overcome several setbacks including the recession's effect on the transportation industry as well as a shortage of trailers available for purchase at the beginning of 2004.

"All the manufacturers were cutting back and lost a significant portion of their productive capacity. At the same time, all the fleets cut back their buying and later had to replace their equipment. At the beginning of 2004, those two factors came crashing together. If you went in to order 100 trailers, the lead time was almost a year. We could have done close to $30 million in sales last year, but we just couldn't get the equipment," Boethling explained.

CapSource and its subsidiaries have bounced back, ending 2004 with more $7 million in sales, an increase of almost 16 percent compared with 2003. This year, the company expects to do $25 million, putting it back on track for profitability and growth.

The company's leaders have a bold plan to build its operations through acquisitions and consolidation.

"First, we need to finish what we are doing in Mexico by improving our service delivery and providing fleet service. Next, we want to build the mirror image of our Mexico operations on the American side of the border. Third, we need to examine the synergies of the business on both sides of the border," Boethling said.

In the same manner that Remolques y Sistemas Aliados de Transportaction generates leasing business for Rentas y Remolques de Mexico, and Rentas y Remolques de Mexico subsequently generates parts and service business for its sister company, CapSource plans to build strong relationships between its Mexican and American counterparts. CapSource plans to acquire as many as four American companies and one Mexican operation in order to achieve its objectives.

Although CapSource's two subsidiaries are based in Mexico City, CapSource is looking specifically at providing service around the major transportation corridors through the border including 1-35 through south Texas, I-5 through California, and other routes through Nogales, Ariz. and El Paso, Texas.

"As we grow the leasing business, the focus is going to be on those transportation corridors. But as the business grows, it will become a national business. Our goal is to help the firms that transport that freight across the border whether those firms are U.S. firms or Mexican firms," Boethling said.

© 2005, Boulder Business Information Inc.