The LMV Story: Emphasis on the Lessor

LMV Leasing, Inc., formerly Lease Motor Vehicle Com­pany, displays a new name and offices in Pittsburgh, Penn­sylvania.

The company maintains a diversified vehicle and equip­ment leasing program that successfully serves large corpo­rate accounts on a nationwide basis. A sampling of their client list includes Allegheny Ludlum Industries, Inc., Burn-up & Sims, Inc., H.J. Heinz Company, Joy Manufacturing Company, Michigan Gas Utilities Company, Standard Spray & Chemical Company, Inc., United States Steel Corpora­tion and Vulcan Materials Company. A special emphasis is placed on a number of professional and trade groups to attract small to medium size accounts to complement LMV's growing list of large corporate clients.

Continued success over its twenty-three year history may be attributed to the company's strong emphasis on leasing's basic lessor responsibilities, i.e. Service, Integrated Expertise and Administrative Simplicity.

LMV is justifiably proud of its steady growth pattern which indicates a doubling of its fleet size over the past eight years and a threefold increase in its dollar volume.

Although specializing in finance leasing, LMV also offers an acquisition and disposal service for companies which wish to own rather than lease their vehicles. Escrow mainte­nance leases which include tires, glass, full maintenance and insurance are also available through the company.

Perhaps the primary reason for the initial and continued success LMV has enjoyed, is John McKean, its founder, president and principal innovator.

An Analytical Approach

McKean, an industry leader, is active in the American Automotive Leasing Association, Automotive Fleet and Leasing Association and National Association of Fleet Ad­ministrators. His analytical approach to the business coupled with his genuine interest in his employees have combined to present a comfortable success oriented at­mosphere in LMV's headquarters. The many employees of the company look forward to the annual results of their profit-sharing program which reflect their efforts through­out the year.

"LMV's per unit profit margin is the same or less on volume leasing accounts today as it was twenty-three years ago." McKean adds, "Increased volume and effi­ciency improvements are primarily responsible for our pric­ing stability. Except for interest escalations, LMV has vir­tually held the line on rates for all basic contracts during this period."

The strength behind the company's continued growth and success emanates from its own people.

Wayne Cummings, Vice-President of Sales, had the fore­sight, during the recent energy crisis, to recommend inter­mediate automobiles to LMV's clients while the conversion to compacts and sub-compacts was the dominate trend. Al­though the total operating cost of the intermediate models is nearly comparable to the full size, the current demand for intermediate-size used cars indicates his compromise proven to be an excellent decision.

Improved engineering (such as the electronic ignition), the advent of the catalytic converter providing increased gas mileage, together with the significantly increased cost of equipment and the unpredictable status of the used car market highlight LMV's reasoning for recommending to their clients an extended turnover period for new car re­placements. Historically LMV's replacement timing aver­aged 27-28 months, however, they expect an increase to over thirty months under the new guidelines.

The "Reclamation Engineer"

Bill Watt, the firm's Used Vehicle Manager, known in­ternally as their "Reclamation Engineer," takes pride in his close relationship with automotive wholesale brokers and the automobile auctions who handle the used vehicles.

Bill gives the Lessee's drivers first choice of all used ve­hicles and makes every attempt to sell directly to them. In the event the driver does not want the vehicle, it is offered to the delivering new car dealer. If the vehicle is not sold at this point, it is assigned to a broker or an auction consider­ing geographic location, type of vehicle, mileage, condition, and color.

Bill has found that the sale price of a vehicle is as good as the broker or the auction representing the vehicle, LMV does not have a favorite method. The auction or broker who can deliver the best performance is assigned the vehicles. Performance is evaluated by time, accuracy of condi­tion reports, time to merchandise, and sale price.

Reorganization

George Watt, Manager of Purchasing, is presently reor­ganizing LMV's national dealer network in an effort to achieve a more centralized and economic buying policy. Watt theorizes, "By concentrating our vehicle purchasing activity, while concurrently maintaining customer satisfac­tion, we expect to achieve an optimum purchasing price as well as dealer loyalty." While Watt's department negotiates the purchase agreements and selects the delivering dealers, a special effort is made to arrange delivery through a dealer chosen by the client when it is both practical and economi­cally feasible to do so.

Edgar Kimmell, Vice-President-Controller, and Mary Zoltak, Assistant Secretary and Office Manager, who are responsible for LMV's smooth administrative and billing procedures explained that use of a service bureau for data processing purposes is extremely more satisfactory than an in-house computer due to a fluctuating work load.

"We are currently utilizing at least ten financial sources since we have been asked, on occasion, to coordinate fi­nancing arrangements with our lessee's banks in addition to our own institutions," Kimmell explained. He is proud of the accounting procedures and controls installed. Kimmell continued, "We recognize our responsibility to lessees of rendering accurate, reliable reports. Coordination of this responsibility with that of internal accounting is an interest­ing facet of LMV."

The current national economic conditions and resulting uncertainty in the automotive industry are presenting many new challenges to leasing companies. LMV is constantly analyzing and evaluating policies, procedures, and recom­mendations particularly related to manufacturers pricing changes, incentive plans, used car market conditions and customer service.

In terms of long-range corporate objectives, McKean ex­plains that the company makes every effort to maintain their present accounts. A high retention percentage is para­mount. With continuous success relative to this objective, he is confident of a growth factor of 12 to 15-percent annually.

McKean graciously avoids the deals that some com­petitors make. He states that some leasing arrangements transacted, "are so personalized that the paperwork re­sembles a lawyers dream."

Typical of McKean's business philosophy is his opinion that, "if it doesn't "add-up" and make sense after a few minutes review, we do not want the business." It may be the basis for his optimistic and yet successful assessment of the future of the industry when he says, "We really do not see why basic rates will or should change appreciably in the years ahead.