The Car and Truck Fleet and Leasing Management Magazine

PHH: 25 Years of Service

January 1971, by Ron Offen

[originally published in January 1971] Baltimore is an interesting and engaging city. A fascinating blend of conservative traditionalism and freewheeling modernism, it offers vistas of quaint raw-house and luxurious in-town estates, a moody harbour in which the frigate, Constellation, rests as a structural rebirth, and a population that tempers its shrewd business acumen with the graces of a gentility and charm that seem part of a bygone era.

But more importantly, for the fleet industry, Baltimore is the home of Peterson Howell & Heather, the world's the world's largest fleet management and leasing company. Of course, PHH is a great deal more than that, and attempts to characterize it have often failed. As John S. Lalley that we are in a fascinating multifaceted business that is extremely difficult to describe accurately or adequately in a few words..."

In honor of the 25th Anniversary of the founding of this world-renowned industry leader, AF has  decided to expend more than just a few words to get to the heart of the PHH story to discover just what it is, how it got that way, and where it is headed. Our focus will be primarily on the Car Plan Division of this congeneric giant; but taking the lead from PHH's own philosophy that stresses the "man" in management, we will zero-in with finer tunings on the men responsible for the company's outstanding success.

HISTORY

It was back in January, 1946 that Harley W. Howell wired Duane L. Peterson and Richard M. Heather, "Have decided to join you and Dick in Baltimore... Plans look good. See no reason why we shouldn't enjoy success and a pleasant business association." Just three days later the partnership name that means so much to the fleet industry today was agreed upon and a new company was born. The idea for the company itself was the brainchild primarily of Peterson. He had formerly enjoyed a corporate position with Butler Bros. In Chicago and had just recently in Baltimore shortly thereafter as a business consultant. While engaged in this pursuit, he came up with the idea of a management plan for large automobile fleet users.

Both Howell and Heather had been associates of Peterson at Butler Bros. Possessing a deep dedication to sound business principles and confident of their ability the three men quickly moved to establish their partnership. Shortly after, they were joined by Dale F. Spencer, another former Butler Bros. employed who was just out of the Air Corps and who had such faith in the new company and its leadership that he worked without pay for some time.

Since there was a shortage of cars just after World War II, the new company concentrated on developing a car management plan for fleet users. Yet as early as June, 1946 they were holding talks with Chrysler, Ford, and General Motors in Detroit so that they would be prepared for expanding into leasing operations once cars became more readily available. Meanwhile, they had moved to larger quarters and signed their first management contract for the small fleet of the Gibson Art Company. Shortly afterwards, they were also able to convince Johnson & Johnson of the value of their new service, and signed them up as a customer.

After that, the company seemed to soar to the top. Though its top management was committed to a "long-haul" rather than a "fast-buck" business philosophy, their idea caught on like wild-fire. Soon they had made the necessary arrangements with large financial institutions and backers and entered the actual leasing end of the car management plan that Howell had evolved. But it was all three partners, according to the management of PHH today, who developed the idea of the finance lease that soon became a byword in the fleet industry.

During the next ten years, PHH began branching out into other areas of transportation management and leasing. In 1951, truck leasing was added to the services offered. By 1953 the company had arranged with Hawkins-Shanahan Co. a discount plan for PHH customers whereby they could purchase tires on a discount plan for their fleet cars. A year later, having outgrown their original quarters, PHH moved into the newly constructed two-story building and in 1963 into the six-story structure that now houses the company on historic Charles St. In the mid-fifties data processing equipment was installed for tabulating and statistical services; the first aircraft ease was signed with Marshall-Wells; and the PHH Dealer Lease Plan was offered to fleet-minded dealers.

MAJOR TURNING POINTS

Major turning points in the development of the company occurred in 1952 when PHH extended their operations into Canada; in 1866 when the company purchased the Hawkins Co. (in order to handle simple maintenance services and glass and tire replacement at a discount); in 1969 when it purchased National Truckers Service (a type of credit card system that allows PHH customers to purchase diesel fuel and related supplies through certain member truck stops throughout the country); in 1968 when the wholly-owned finance subsidiary, PHH Funding, was established; and in the late Sixties, when they first offered the sight-draft reimbursement plan for drivers of PHH customers and the PACE control program which and travel-related costs (in addition to those that are auto-related).

CORPORATE STRUCTURE

At the present time, the energetic young company is guided by a group of men who match the company image in vigor and youthfulness. Led by John Lalley who became president in 1966, the average age of the senior management team of the company is a surprisingly low 45.

Lalley, who joined the company in 1952, had previously been with the Civic Bureau of the Baltimore Association of Commerce and the Maryland division of the American Cancer Society, where he had been Regional director.

"It seems like an unlikely background for someone who would eventually become involved in this business;" Lalley advised AF in his office in Baltimore, "but while doing work with the American Cancer Society I came in contact with Duane Peterson who convinced me there was a big future at PHH."

Subsequent events for both PHH and Lalley proved that Peterson had been right. Digging in at his new position under Peterson, Lalley soon developed the Account Manager concept of the company's car plan which soon became a PHH hallmark and was widely imitated in the industry. And at the same time he completed his Law degree begun earlier at the University of Maryland.

Under this plan a PHH employee is permanently assigned to an account as a client's representative. Working in liaison with the client's fleet manger and other management figures, it is his job to personally handle all complaints, to know as much about the client's business and fleet as possible in order to constantly upgrade the client's Car Plan; to conduct regular seminars for the client in order to keep him abreast of latest fleet and leasing trends, and to act as a go-between when warranty or similar problems arise between the client and the auto manufacturers.

Although Peterson has since passed on, Harley W. Howell serves as a company director, and Richard M. Heather remains active as Chairman of the Board. From this position he continues to direct the destiny of the company, overseeing its latest developments, Checking its proposed evolution against the original concepts of the company when he helped found it.

Under Heather and Lalley are a group of dedicated and knowledgeable Senior Vice Presidents, each in charge of one particular division of the company. W.C (Bud) Fraser heads the Car Division; W.E. Webster is in charge of Group One operations (tuck leasing, special leasing, Hawkins Division, and National Truckers Service); W.B. Hendrix supervises the legal, title and tax, contract administration, and general services duties of Group II; W.H. Hill heads the Finance Group; Dale F. Spencer (no longer working for nothing as in the first days of his employment) is responsible for public relations and building administration; and J.G. Geckle heads the important planning and development group.

HOME OFFICE

Though the current home office on Charles St. is only 7 years old, PHH is already straining its facilities due to its ever-mushrooming activities. Built specifically for the company, the modern concrete and glass structure features a two-story entrance lobby; self-contained, sheltered parking for employees; and elegant modern appointments throughout.

Currently housing almost 350 employees, its days may be numbered as the corporate home of the expanding giant.

As a PHH spokesman told AF, during its recent visit to the imposing structure, "It seems impossible, but we've already outgrown the building-and we're going to have to do something about it in the near-future."

While there, AF also asked why PHH had never established any branch offices. Of  those questioned on this score, perhaps the best answer came from President Lalley.

"We're committed to the idea of centralized control," he advised. "All statistical information, all or management expertise is concentrated at this one location. Consequently, it seems foolish and wasteful to have a man permanently located at some far-flung location, who would only have to be calling back to us for the information he needed to service his accounts."

CAR PLAN DIVISION

But President Lalley isn't the only member of the PHH team that can come up with decisive and knowledgeable answers. Take for example the ones we obtain from "Bud" Fraser, who heads the Car Plan forces.

Responsible for the needs of over 700 clients (127 of which are among the top U.S. companies) Fraser's division is responsible for the 50-thousand cars purchased and 35-thousand traded through the fifty states and Puerto Rico.

But as Fraser is quick to point out when quoting these impressive figures, PHH is not committed to leasing as the only solution to a fleet user's needs.

"For some companies, leasing may not be the answer for one reason or another." He advised. "This can only be established after we have conducted on in-depth study of the client's needs. You see, we are really interested in the concept of providing a management service for the client. That may incorporate leasing; but it may mean merely a management control system with client-owned cars."

Among other things, we asked Fraser what makes the PHH Car Plan unique in its field. According to him, this answer can be found in several areas that the company has originated and developed. First, there is the fact that PHH is an independent company with no ties to any individual supplier. This means that the company can suggest strictly unbiased alternatives for a client.

"You see, we're interested in selling a service, not cars," was the way Fraser put it to AF.

Second, Fraser mentioned the concept of the Account Manager which has been developed to a high degree at PHH. According to him, these men become so deeply immersed in their specific client's operations and needs that they can provide an immense service to the client.

Third, due to the size of PHH, the company has a great deal of influence on the auto manufacturers. This aids the customer not only in terms of warranty claims and product disputes, but also with respect to delivery and service. In fact, both Ford and General Motors have full-time employees based in the PHH headquarters to see that everything runs smooth;

Fourth, there is the PHH dealer plan which aids in delivery, service, and top resale value. As an adjunct to the matter of their dealer plan, we also queried Fraser on the subject of subsidies. He advised that PHH has always been against subsidies, and that the PHH concept in terms of obtaining best results for fleet buying is to establish a strong, independent network of supplying dealers.

Last, Fraser mentioned the vast resources of PHH statistical data that each client has at his disposal.

"After being in this business for 25 years," Fraser commented, "we've gathered a great deal of information on the fleet car. Most of this is now in our computer bank, which the client can tie into and utilize to his best advantage."

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