Category Archives: Fleet Sales

Fleet – How to Develop a Culture of Fleet Policy Compliance

Fleet managers have countless stories of drivers blatantly violating fleet policy with the refrain, “I didn’t know we weren’t supposed to do that.” Whether it is using a cell phone while driving or buying premium fuel instead of regular unleaded, fleet managers refer to this phenomenon as “driver amnesia.” In my discussions with fleet management companies over the years, they tell me the best managed fleets tend to be those whose drivers adhere to a written fleet policy. Does your corporate culture encourage compliance with fleet policy?

Adherence to fleet policy is crucial and it should be part of each company’s overall business strategy. Once a policy is established, it is the fleet manager’s responsibility to communicate it to drivers. Each of your drivers should know the rules governing the use of a company vehicle and what actions will be taken for noncompliance. An all too common problem is that the fleet manager communicates policy to the drivers’ managers, but the policy doesn’t get communicated to individual drivers. To avoid this problem, many companies teach policies and procedures regarding company vehicles as part of new-employee orientations and provide printed fleet policy manuals with each vehicle.

A Culture that Encourages Compliance

The fleet manager must have the authority and backing of senior management to address a driver’s inability to operate and maintain an assigned vehicle in conformance with fleet policy. This authority allows the fleet manager to address violations of fleet policy without approval or direction from upper management. With this in mind, it is critical a fleet manager makes sure all drivers uniformly adhere to company fleet policy. There should be no exceptions to your company vehicle policies.

To ensure drivers observe fleet policy it needs senior management backing. It is only when senior management communicates this message to the rank-and-file and begins to hold drivers accountable can you expect to see the emergence of a corporate culture conducive to policy compliance.

Are Your Drivers Following Fleet Policy?

Just because your company has a written fleet policy and procedures manual doesn’t mean your drivers are following it. As fleet manager, one of your responsibilities is to promote driver compliance with fleet policy. This not only controls expenditures, but also protects your company from potential liability exposure. To ensure fleet policy remains uppermost in the minds of drivers, many companies stress the need to regularly re-communicate it to them. When policy is constantly re-communicated, you will find you spend less time disciplining drivers for policy infractions. Companies use a variety of methods to reinforce fleet policy such as e-mail reminders, the corporate Intranet, paycheck stuffers, teleconferences with regional office employees, or setting aside time at annual company meetings for fleet policy presentations. It makes no difference how you do it, the important point is to understand the need to consistently remind drivers about these corporate policies.

How do you increase driver compliance with fleet policy?

Here are 10 suggestions:

[list:rxdgxi3f]1. When developing or reevaluating fleet policy, solicit the participation of all affected departments, such as sales, administration, purchasing, HR, and accounting, along with all vehicle user groups. By involving them in the decision-making process, you increase the likelihood of their buy-in and support of fleet policies.

2. Make fleet policy easily accessible to drivers and managers by posting it on the company Intranet.

3. Your fleet policy manual should be a living document updated annually. As changes occur within your company, revise your procedures to reflect these changes. Likewise, eliminate those policies that have become outdated. What was right yesterday may not be right today. Also, as part of your annual fleet policy review, you should survey your drivers to give them an opportunity to express their opinions or dissatisfaction about fleet policies that govern them.

4. Set aside time at company meetings to make fleet policy presentations to the drivers and managers. Also, conduct teleconferences with drivers who work at regional offices. Use these meetings to reemphasize the importance of policy and cost control.

5. Develop a summarized fleet policy pocket manual that drivers can keep in the glove compartment of their vehicle. However, if you do this, it is critically important to keep it updated.

6. Send periodic e-mails or voicemail messages to drivers on specific fleet policy reminders, in particular, on those issues that have higher-than-normal incidents. Also, cc the driver’s supervisor on important items or those supervisors of drivers who were not within policy.

7. Issue a fleet policy summary sheet when distributing gas cards to drivers. This helps reinforce fleet policy with drivers.

8. Create a newsletter that is mailed or e-mailed to company drivers to promote awareness of fleet policies by providing helpful suggestions on driver safety, vehicle care, and other topics. Likewise, use the company Intranet for similar effect. Also, post information on cost savings on the driver Web site, such as maintenance and fuel savings programs and how drivers can take advantage of them.

9. Leave a weekly or monthly message on your voicemail greeting advising drivers of new policies and reminders. Another way to communicate fleet policy changes is to use paycheck stuffers.

10. How you organize your fleet policy Web site can also help increase readership and awareness. For instance, if your company offers a safe driving award, place the application on the last page of the fleet policy manual (as well as on its Intranet site) to force drivers to look through the sections to find the award requirements. The rationale is to get drivers to read the fleet policy manual after they receive it.[/list:u:rxdgxi3f]
If you want to increase the likelihood that your drivers follow fleet policy, you need not only to communicate it to them, but, more importantly, re-communicate it on a regular basis. When it comes to fleet policy, there is no such thing as being redundant. In fact, the secret to increasing driver compliance with fleet policy is just that — redundant communication.

Cost Control Starts With the Company Driver

Another important aspect of policy compliance is that it helps reduce unnecessary costs. It is very expensive to operate a company-provided fleet. Typically, fleet operations is one of the top five categories of nonproduct-related spending at most corporations. All too often, however, managers attempt to control fleet costs on the backend. The best time to control cost is before it occurs and the way to do this is by establishing policies and procedures that inhibit unnecessary spending and protect corporate assets.
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Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing.

mike.antich@bobit.com

Fleet – Think Like a Used-Car Sales Manager

When resale prices soften, there is a pendulum-like resurgence in marketing used vehicles to employees. On the other hand, when the resale market is strong, employee sales programs at many fleets are on auto-pilot, so to speak. These fleets are complacent about employee sales (waiting for buyers come to them) and do not aggressively market the program to new buyers. The national average of vehicles sold to employees is 23 percent. However, by aggressively marketing employee sales, many fleets could sell as much as 50 percent of their vehicles in-house. This can be achieved by expanding sales beyond drivers to other employees, family members, friends, and the surrounding community. Some companies even market used vehicles to the employees of other companies. The competitive-bidding environment of an auction is the best way to establish a vehicle’s fair market value; however, this is a wholesale value. Employee sales, if done correctly, are priced above wholesale.

Pricing is the Critical Element

Most companies allow employees to purchase vehicles at wholesale market value or a percentage back of Black Book or other guidebook. The lower price is possible by eliminating auction fees, transport charges, and recon expenses. A few companies sell vehicles at steeper discounts, far below fair market value, viewing the reduced pricing as an employee perk. Fleets that price aggressively below market value need to think twice before complaining about depreciation rates. In a similar vein, other companies price vehicles sold to employees at the remaining book value rather than fair-market value. The problem with these two pricing strategies is that if a vehicle is sold to an employee for substantially less than market value, the difference is taxable income and should be treated as imputed income on an employee’s W-2. In addition, this is a potential Sarbanes-Oxley issue. No special allowances should be made in an employee sales program; such exceptions are a "red flag" for a skeptical SOX auditor.

At the opposite extreme, some companies price vehicles higher than fair market value – at the equivalent retail price. Needless to say, profiting at the expense of your employees is detrimental to corporate morale. You need balance when establishing employee pricing. End-of-service vehicles need to be offered at a price higher than wholesale, but lower than retail. It is important to remember that all quotes will be "shopped" against similar vehicles available for sale in the retail market.

Most employees consider it a perk to buy company vehicles at near-wholesale prices. However, do not use the word "benefit" in describing an employee sales program since the IRS could perceive it as a taxable benefit. Also, a successful employee sales program must have a non-negotiable pricing policy. Although 17 percent of the nation’s fleets allow employees to submit bids and negotiate the vehicle’s ultimate selling prices, this is "thin ice" and can easily become a Sarbanes-Oxley compliance issue, especially if your recordkeeping isn’t up to snuff.

Market Aggressively to Employees

Fleet management creates a product — a used vehicle, which is "produced" during its term in service. A fleet manager must be a "used-car salesman" to maximize the percentage sold to employees. You must market vehicles rather than just sell them. One mistake many fleets make is waiting for employees to request pricing. For every vehicle coming out of service, a formal price quote should be provided to the driver, whether or not the driver requests one. This gives drivers time to deliberate the purchase and arrange funding if they are interested in buying. Also, drivers who weren’t initially interested may be swayed upon seeing the price. It is not necessary to offer extended warranty/service contracts with used fleet vehicles, but doing so will create additional value for the purchaser. Approximately 14 percent of commercial fleets offer an extended warranty program for out-of-service vehicles sold to employees. However, it is important to give drivers the option to buy an extended warranty program. For example, the cost of the service contract should be built into the vehicle’s selling price, but permit the buyer to eliminate the option, which would correspondingly reduce the selling price.

Employee sales are the best way to reduce your days-to-sale, and it represents the fastest cash flow in recouping resale proceeds. In the final analysis, employees represent the strongest resale market for company vehicles. They know the history of the vehicle and, as a result, have a high comfort level in making the purchase decision. Employee sales also encourage better care of vehicles during their service lives. However, you should be "street smart" and monitor maintenance histories on an ongoing basis to prevent "over-maintained vehicles" by drivers in anticipation of purchase, such as purchasing of four new tires prior to turn-in.
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Mike Antich has been covering the fleet management and vehicle remarketing markets for more than 20 years. During this period, Mike has written or edited more than 4,600 articles on the subjects of fleet management, manufacturer fleet activities, the fleet leasing industry, and vehicle remarketing.

mike.antich@bobit.com

Auto Fleet Sales Runaround

Many automakers are slamming the brakes on any increases in fleet ad spending, as sales to rental and commercial customers plummet amid the general bottoming out of the automobile business.

U.S. auto sales overall dropped 18% in 2008 to 13.24 million vehicles, with Chrysler down 30%, General Motors Corp. down 23%, Ford Motor Co. down 21% and Toyota Motor Corp.’s U.S. sales down 15%, according to figures compiled by Autodata Corp.

Fleet-specific data mirror those numbers. According to JATO Dynamic U.S.’ Model Mix data, GM’s fleet sales were down 31% to 436,672 year-to-date through September; Ford’s fell 15% to 347,511, and Chrysler’s declined 25% to 294,615. The anomaly, Toyota, saw its fleet sales increase 13% to 200,680.

The reining in of spending is especially hurting publications that cover the fleet sector. “2008 was a record year for us up till September, and then we limped across the finish line,” said Sherb Brown, group publisher of Bobit Business Media’s Automotive Group, whose titles include Automotive Fleet and Business Fleet.

But the picture may not be so bleak after all, now that the federal bailout package for the auto industry has been approved. Before it was green-lighted, the Big Three automakers were “slashing their budgets,” Brown said. “Now we’re at least talking about budgets and ad programs for 2009. Now there’s going to be a 2009 for all of them,” he said.

Fleet sales have suffered across the board, from the corporate and government sectors to the daily rental market. Many credit-strapped businesses and government entities are putting off new-car orders and letting the odometer run a little longer on current vehicles. Business Fleet News recently reported that the recession caused nearly 800 trucking companies to fold during the third quarter of 2008.

Auto Rental News reported that rental car companies purchased 1.5 million new vehicles in 2008, down 21% from 2007. According to Automotive News, Enterprise Rent-A-Car, the nation’s largest rental company, plans to buy 400,000 new vehicles in the 2009 model year, about half as many as it bought in the previous year. (Automotive News is a sibling publication of BtoB.)

Automakers will argue that some of the drops in rental sales were planned, as the Big Three vowed to reduce such sales in 2008 to less than 20%. Historically, automakers have unloaded their excess inventory at discounts to the rental fleet market to make up for weak retail sales. But those vehicles ultimately flood back into the market at auction, potentially driving down the brand value of the most recent model year vehicles.

“Fleet sales aren’t inherently bad,” said Jesse Toprak, senior analyst for Edmunds.com. “A controlled number of fleet sales are good. How many times have you heard of someone who rented a vehicle and liked it so much, they ended up buying it? Done properly it can control inventory.”

Chrysler, which, along with GM, is participating in the federal government’s $17.4 billion bailout of the industry, attributes a sharp drop in December fleet sales to its plan to reduce its reliance on daily rental sales.

“That was planned before the market went into recession,” said Steven Landry, Chrysler’s exec VP-North American sales, marketing and Mopar parts and service, who has taken over the VP-CMO responsibilities of Deborah Meyer, who left the company last month.

“Most of [the December decline] was daily rental,” Landry said, adding that Chrysler had wanted to reduce daily-rental sales to 200,000 units and that the final tally for the month was 197,000.

Landry said Chrysler has no intention of changing its ad messaging in light of the economic slump. Current advertising, created by Troy, Mich.-based BBDO Detroit, focuses on the company’s fleet vehicles and their capabilities, in particular its truck lines.

And while it’s planning at least one launch this year, with a new Dodge Ram Heavy Duty pickup truck expected to be unveiled in September, the company doesn’t anticipate increasing its budget in an effort to gain market share, Landry said. “We’ll have to adjust our budgets to where the industry will be, which is relatively flat,” he said.

Ford is standing by its fleet ad spending plans despite the downturn. “We haven’t diminished our spending levels year over year,” said Gerald Koss, marketing manager, Ford North America Fleet Lease and Remarketing Operations.

This month the company debuted a new fleet ad campaign, created by JWT Team Detroit, Dearborn, Mich., that marks a departure from typical productcentric ads. The campaign focuses on Ford’s brand positioning: quality, safe, green and smart, to represent its strides in technology. One ad shows a chalkboard filled with mathematical equations, with the suffix “ER” imposed over them, to show that adding “ER” to each of its brand values enhances them.

“We added "ER’ to smart ideas and made them smarter,” reads the copy. It goes on to detail Ford’s technological advancements through its Ford Work Solutions, which provides tools to help companies better track their fleets’ performance. The call-to-action tagline is in line with its corporate message: “Drive one.”

GM is sticking with its current fleet marketing budget as well and doesn’t plan on any major strategy changes. “It’s steady Eddie,” said Brian McVeigh, GM fleet and commercial operations general manager. Fleet customers “don’t buy on style or trim; they buy function,” he said.

GM’s fleet marketing relies mainly on print and Web advertising created by its agency of record, Perich Advertising & Design, Ann Arbor, Mich. Also key to GM’s communications strategy, McVeigh said, is its network of 500 fleet-focused dealerships around the U.S. that run co-op advertising in local media.

“We concentrate on growing at the dealership level,” McVeigh said, adding that GM’s “Works for you” message has to resonate in all of the dealers’ communications. “The message has to be consistent with the one-voice concept,” he said.

McVeigh blames the year’s fleet sales decline on a strike by American Axle & Manufacturing, a key supplier, that put GM’s production four months behind schedule. He also cited the cooling of the building boom in formerly hot markets, such as Fort Myers, Fla., and New Orleans.

All these factors make GM’s participation in trade shows and alliances with organizations such as the American Home Builders more important than ever, McVeigh said. “Most of these folks capitalize their vehicles—they buy them,” he said. “It’s a very steady business. It’s down particularly because of home building, but it’s still pretty solid.” M
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by Patricia Riedman

Bleak New-Vehicle Sales Ushers a Strong Used-Vehicle Market

Today’s new-vehicle market will generate (ultimately) the used-vehicle market of tomorrow. If there is a decrease in new-vehicle sales, there will be a corresponding decrease in the future number of used vehicles in the marketplace.

Even though there is a lot of nervousness in the market, no one is anticipating a dramatic decrease in new-vehicle commercial fleet orders for the 2009 model-year. However, the same cannot be said for the retail new-vehicle market. The projection is for the 2008 model-year to close out with an anemic 14.7 million new-vehicle sales, perhaps lower. This compares to16.1 million new-vehicle sales in 2007, 16.5 in 2006, and 17 million in 2005.

New-vehicle sales seem to be moving from weak to weaker. "New-vehicle sales in June represented a seasonally adjusted annual selling rate of just 13.6 million units. That is the slowest pace since August 1993," said Tom Kontos, executive VP customer strategies & analytics for ADESA. Kontos blames the drop in new-vehicle sales on macroeconomic conditions – tighter credit, higher fuel prices, and a weaker labor market.

In a July 14 press conference, GM said it is prepared for total U.S. new-vehicle sales to be as low as 14 million for the next two years. One thing is certain, in the near-term, there will be much fewer trucks built than in the immediate past. GM Chief Operating Officer Fritz Henderson said the automaker intends to reduce truck production capacity by 300,000 units. Likewise, all other OEMs are also reducing their truck production.

Manufacturing Used Vehicles

The wholesale used-vehicle market has been a real challenge for fleet managers since the first of the year. However, if you accept the truism that new-vehicle retail sales "manufactures" the used vehicles of tomorrow, then we should anticipate a smaller inventory of used vehicles in the wholesale market in the future.

"If we’re not building as many new vehicles, where will the future used-vehicle supply come from?" said Darrin Aiken, assistant vice president, remarketing for Wheels Inc. "If we have weak new-vehicle markets in 2009 and 2010, there is a distinct possibility there may be a shortage of used cars three years afterwards. When there is a shortage of inventory, experience tells us that resale prices will increase."

Others agree with this assessment. "With the recent announcements by Ford and GM, some vehicle segments are dropping drastically for 2008, 2009, and beyond. Will this lower supply of future used vehicles be the catalyst for higher used values two to four years down the road? Quite possibly," said Ricky Beggs, VP and managing editor of Black Book.

Light at the End of the Tunnel

There is a lag time in the "used-vehicle manufacturing" process. For instance, the 2009-model vehicles that fleets are starting to order will not enter the wholesale used-vehicle market until 2011 or 2012. It’s safe to say that the market conditions of 2012 will not be the same as 2009. (If they are, then we’re all in a lot of trouble.) Once the economy begins its inevitable cyclical upswing, the secondary fleet market should return to its historical purchasing levels. In that case, there may be a tight supply of used vehicles, especially trucks, due to the pent-up needs of the construction industry, which is deferring the purchase of replacement vehicles.

Beggs also cites the country’s growing population as another factor that will stoke used-vehicle demand. "With the country’s population and the number of drivers expected to grow to significant levels in the next four to five years, the need for used vehicles is expected to increase, thus creating an upward push on values," said Beggs.

These and other factors will be the catalysts triggering market supply-and-demand dynamics. A lower supply of used vehicles means that demand (especially in a recovering economy) will exceed supply. This will create a rising tide effect of stronger demand for all used vehicles, resulting in higher resale prices.

This is the light at the end of the dreary tunnel through which we are currently trudging.
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Written by Mike Antich
http://www.automotive-fleet.com
mike.antich@bobit.com