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Market Trends

10 Milestones That Changed Fleet Management

May 30, 2008, by Mike Antich - Also by this author

 By Mike Antich 

In the late 1930s and early 1940s, businesses started to migratefrom salesmen reimbursement to company-owned fleets. Since then, 10 milestoneshave dramatically changed the nature of fleet.

1. Higher Content Fleet Vehicles:In the early days of fleets, companies had a choice of three models: Ford,Chevrolet, or Plymouth.The typical fleet car was the standard model with minimal equipment. Thebiggest selector deliberations were over the economies of installing a radio oradding air conditioning for vehicles located below the Mason-Dixon Line. The “Plain Jane” fleet car became a historical footnote asOEMs bundled options into packages, allowed free-flow option ordering, and provedthat higher-content vehicles sold better in the resale market.

2. Creation of the Open-EndLease: Early lessors offering full maintenance leases were R.A. Company,established by David, Harry, and Nathan Robinson, and Four Wheels, founded byZollie Frank and Armund Schoen in 1938. Changing conditions in the 1950s led tothe development of open-end or finance leasing, which PHH offered in 1951. Fleetswanted the ability to replace units after a 12-month period with off-balancesheet reporting. In 1981, the Swift Dodge vs. IRS court decision legitimizedthe use of the TRAC clause in an open-end lease.

3. Factory Ordering: Beforethe advent of OEM fleet departments, companies purchased vehicles from individualdealers. Use of dealer ordering codes by nondealers, such as fleet lessors,allowed factory-direct orders. Another factory innovation was the introductionof fleet previews to provide new-model specifications to facilitate vehiclereplacement planning.

4. Drop-Ship/CourtesyDeliveries: In the late 1940s, the concept of volume drop-shipping fleetvehicles was developed. At that time, PHH factory-ordered vehicles delivered todrivers by local dealers. Wheels and McCullagh (acquired by GE) starteddelivering cars from regional dealers directly to drivers. Ultimately, itbecame an accepted industry practice to pay a courtesy delivery fee tonon-ordering dealers to deliver and prep vehicles.

5. Creation of FleetManagement Services and National Account Program: The first recordedpurchase of a fleet management program, other than leasing, was by Gibson Artin 1946. Tire company national account billing started in the early 1950s. PHHand Consolidated Service Corp. (acquired by LeasePlan) started selling tiresnationally using centralized billing. Other programs such as maintenance managementwere not in great demand because gas was cheap and operating costs were manageable.This gradually began to change in response to market demands and new fleetservices proliferated such as fuel management, accident management, and personaluse reporting.

6. Repeal of the ITC:Prior to the Tax Reform Act of 1986, significant tax benefits promptedcompanies such as Dart & Kraft, PepsiCo, and Xerox to acquire existingfleet leasing companies. However, as a result of the repeal of the InvestmentTax Credit (ITC), many corporate entities sold off their fleet leasing businessunits. Around this time, GE entered the market as a ready buyer and initiated aseries of rapid-fire acquisitions that coalesced the industry into 10 majorfleet management companies.

7. Outsourcing: In the1980s, the trend to outsource non-core services swept Corporate America. In1989, PHH created the first-ever total fleet management program with EastmanKodak. In-house fleet departments witnessed staff reductions as administrativeservices were outsourced to third-party vendors. Outsourcing also changed theskill set required of fleet managers. In the profession’s early years, mostfleet managers had a technical or automotive background. As these fleet managersretired, a new generation of fleet managers emerged, whose backgrounds were financial,administrative, or managerial.

8. OEM Incentive Programs:In the early days of fleet, the standard fleet discount was a dealer-negotiated10 percent off list. As competition grew, OEMs developed more complicated incentiveprograms, such as guaranteed depreciation protection and rifle shot programsoffering tiered volume pricing. Also, OEMs introduced holdback for dealers,which were often rebated to fleets. In the early 1980s, OEMs startednegotiating unique and substantial incentive programs directly with individualend users. Prior to this, fleet programs were identical for all fleets.

9. Expanded FinancingOptions: In the early years, financing was straightforward and sourced fromthe manufacturers at Prime or Prime plus one. In the 1970s, financial choicesemerged such as fixed- versus floating-rate financing and commercial paper.

10. Computerization: Thefleet industry could not provide its breadth of services without computers.Wheels and PHH installed their first IBM computers in 1959. In the 1990s, fleetquickly shifted to Web-enabled services. Computers gave lessors the capabilityto evolve into full-service fleet management companies.

Other Catalysts of Change

Besides these 10 milestones, many other changes transformed fleet suchas fuel management, the creation of NAFA, fleet safety requirements, accidentmanagement, strategic sourcing, telematics services, and the regulatorymandates of the Clean Air Act Amendments and the Energy Policy Act.

Let me know what you think.

[email protected]

Comments

  1. 1. Randy Purcell [ February 23, 2009 @ 10:48PM ]

    Great article! Thanks and keep up the good work.

  2. 2. Geomoto [ December 05, 2009 @ 03:48PM ]

    While it will seem self serving... I'd add fleet tracking to this list. Computerization partly covers this but the ability for managers to optimize their fleets by active tracking is an underutilized driver of efficiency.

    Nick

  3. 3. Richard [ February 23, 2010 @ 12:55AM ]

    I own a fleet tracking company for years and always read up on related information. This is a very interesting article. Thanks.

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Mike Antich

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Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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