April 2008, Automotive Fleet - Cover Story
How Fleets Tackle Rising Fuel Costs
By Cindy Brauer
Hybrids and E-85 Models Popular as Alternative-Powered & Fueled Vehicles
The steadily increasing variety of alternative-powered vehicles available to fleets holds the promise to fulfill two corporate goals: reduce fuel spend and cut harmful vehicle-produced pollutants — the greenhouse gas emissions widely believed contributors to global warming.
From hybrid powertrain technologies to ethanol fuel blends, compressed natural gas (CNG), and liquefied petroleum gas (LPG), fleets are exploring the options. However, higher acquisition costs and resale value uncertainty for hybrids and lack of alternative-fuel distribution infrastructure present difficulties fleets must consider.
Toshiba America Medical Systems (TAMS), headquartered in Tustin, Calif., expects to replace its entire 170-unit sedan fleet with Toyota Camry Hybrids. “We will have replaced about half by the end of the 2009 model-year and should replace the remainder over the next two years,” said Jeff Berg, manager, fleet and travel administration. The current TAMS fleet consists of 500 leased vehicles, including Dodge Caravans, Chrysler 300s, Toyota Sienna AWDs, and Ford E-350 van conversions.
Berg expects to save between $3,000 and $4,000 in fuel during the lifecycle of each vehicle.
By this summer, Secura Insurance, based in Appleton, Wis., plans to convert its entire 75-unit fleet to hybrid and E-85-capable vehicles.
Secura has obtained a government rebate for vehicle purchases, an amount that will be reduced as the manufacturer reaches rebate volume limits. Company drivers achieve 8 mpg better than their previous vehicles. Average vehicle lifecycle is 60,000 miles. “The vehicles have performed very well, said Scott Huiras, senior VP of claims for Secura. “The wild card is resale value. We haven’t had to sell one yet; the first should start coming in later this year. We estimated the Ford Escape Hybrid would sell for $1,000 more than the standard gasoline model. With gas prices up, I am hopeful that will turn out to be true.”
In addition, growing availability of ethanol fueling stations in the upper Midwest has prompted Secura’s interest in E-85 vehicles.
Bausch & Lomb, headquartered in Rochester, N.Y., runs a 400-vehicle fleet. In early 2007, the company began deploying in its fleet Chevrolet Impala, Uplander, and Express van flex-fuel vehicles, which run on E-85. The Saturn VUE Hybrid was also added to the fleet selector.
According to Mark Dennis, manager, Bausch & Lomb fleet operations, future fleet strategy will consider deploying smaller, four-cylinder models and additional hybrids, such as the new Chevrolet Malibu and Saturn Green Aura.
The PepsiCo fleet operates more than 20,000 units, which include company cars, service vehicles, and light-, medium-, and heavy-duty delivery trucks. Nearly 650 are Toyota Prius and Ford Escape Hybrids, a total that will likely increase to more than 1,500 by 2010, according to Pete Silva, director-fleet procurement.
“Our Prius vehicles average around 45 mpg, a significant improvement over previous mid-size vehicles,” Silva says.
Dick Prettyman, senior administrator for Cephalon’s 775-unit fleet, seeks to balance the environmental benefits of hybrids with the cost and necessity of retaining a sales force. “Cost sides with the right thing to do now, but losing and retraining a sales force is the overwhelming concern of sales operations,” he said.
The company has incorporated an array of hybrids in its fleet selector, including the Toyota Prius, Camry, and Highlander, the Ford Escape Hybrid, and the Mercury Mariner Hybrid. “We made it a driver choice rather than an edict,” Prettyman added.
“For the 2009 model-year, I am proposing that we reach forward into the 2009-2010 calendar year to pull vehicles into the fall cycle so we avoid the build-out problems that occurred with our initial hybrid vehicle orders.”
Prettyman figures that at current fuel prices, the company can recover the extra cost of the hybrids within three years. “I think the market is moving to greater acceptance of used hybrid vehicles, particularly with younger drivers who can’t afford a new hybrid,” he said.
Comcast Communications, headquartered in Philadelphia, first tested the Ford Escape Hybrid in its 37,585-unit fleet in 2005, according to Bud Reuter, fleet manager.
“We chose the Ford Escape Hybrid because it meets the needs of our technicians,” said Reuter. “They have been very well received by our drivers and all have seen a significant increase in fuel mileage, resulting in fewer dollars spent.”
Since 2001, Exelon has been building its light-duty hybrid fleet, exclusively Ford Escape Hybrids. Headquartered in Oakbrook Terrace, Ill., and primarily serving PECO Energy in Pennsylvania and ComEd in Illinois, the 5,100-unit Exelon fleet comprises heavy- and medium-duty vehicles, light-duty trucks, passenger vehicles, trailers, and other equipment.
“The Escape Hybrids are an ideal solution for our front-line supervisors since the Escapes allow them to carry equipment they regularly transport while maintaining fuel efficiency,” said Dan Gabel, fleet manager. The fleet also includes two medium-duty hybrid bucket trucks, and CNG and LPG vehicles.
Headquartered in Charlotte, N.C., Coca Cola Bottling Company Consolidated (CCBCC) is the second-largest bottling company in the nation, operating a fleet of 2,500 light-duty vehicles that travel approximately 40 million miles annually.
The company fleet includes 550 Prius models. The switch to a hybrid vehicle produced a definitive fuel cost savings. Bo Calloway, director of fleet assets, determined a fuel cost savings of about $6,000 over 100,000 miles for the Toyota Prius. (The savings figures, calculated at a gas pump cost of $2 per gallon now look even better at the current $3-plus price per gallon.)
At a projected 100,000-mile cycle, the running cost-per-mile total is expected to bring another $2,000 per-unit savings, bringing CCBCC’s bottom-line savings to $8,000 per unit.