February 2010, Automotive Fleet - Feature
Commercial Fleet Cost Trends
More than 400 commercial fleet managers throughout the U.S. and Canada responded to NAFA’s 2009 Economic Survey. Results show that despite the economic downturn, fleets are making the best out of the worst situations.
By Mike Antich
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Fleet reductions, decreased budgets, and layoffs are just a few factors that affected commercial fleet managers during the economic downturn in 2009, according to NAFA's "How the Economic Downturn is Affecting Fleet Managers" survey.
More than 400 fleet managers throughout North America responded to the May 2009 NAFA survey. Of the respondents to the survey, conducted over a two-week time span, 80 percent have fleets based in the United States, 7.2 percent have fleets based in Canada, and 7.9 percent have fleets based in both the U.S. and Canada. As many as 4.5 percent of respondents manage fleets globally, with the majority of respondents having one to 500 vehicles in their fleet (36.8 percent).
Though the economic slowdown has many people worried about whether they will be employed, 67.5 percent of fleet managers said they were not afraid that they were going to lose their jobs (32.5 percent said they may get more duties) and 17.5 percent were unsure. However, 15 percent of respondents were afraid of losing their positions, which speaks volumes of the state of the economy.
Since the recession, 46.8 percent of respondents said their fleet management company asked them to renegotiate parts of their contracts. Furthermore, 21.9 percent of respondents said the minimum requirements for vehicle use and/or other assignment criteria had been raised.
Nearly 60 percent of respondents said they had been specifically asked to cut fleet costs for 2009. In conjunction, 31.9 percent said they were asked to reduce the fleet budget in 2009, with 25 percent responding that they hadn't been asked to reduce the fleet budget, but they had plans to reduce it anyway.
Cutting Costs to Maintain Budget
Considering the state of the automotive industry last year, such as the closures of numerous Detroit 3 dealerships, it comes as no surprise that more than half of respondents (58.1 percent) said their fleets had decreased in size over the last 12 months due to the economic downturn.
In a time of economic crisis, the first thing most companies look to improve is the budget. Not surprisingly, more than half of respondents (51.3 percent) said their fleet budget decreased compared to 2008, while 30.6 percent report that their budgets remained the same. Additionally, 58.2 percent said they had been asked to cut fleet costs for 2009.
So what are fleets doing to reduce expenses?
Nearly 41 percent of respondents reported purchasing and/or leasing fewer or no vehicles in 2009. However, to cut costs, 62.3 percent of fleet managers said they negotiated with suppliers to obtain better pricing. Forty percent said they offer less expensive vehicles in their fleets.
Some companies cut costs by hastening their diesel truck purchases to avoid acquiring diesel trucks compliant with the 2010 EPA diesel emissions standards, which went into effect Jan. 1.
The costs for 2010-compliant diesel engines are on average $6,000 to $10,000 more than their predecessors; thus, fleet managers decided to ramp up replacement orders for diesel trucks to avoid more expensive vehicle prices.
It should be noted that fleet managers foresee the new standards as a challenge because it will increase the financial burdens that fleets must endure to remain EPA-compliant.