The Chinese proverb, “May you live in interesting times,” best summarizes industry developments from the 1980s to present, when I first got my start in fleet management. When you examine the seminal events of fleet management over the past 30 years, most were driven by changes in tax law, the introduction of governmental mandates, and tectonic changes in the way corporate America does business, primarily the broad-based trend to outsource manufacturing and non-core services.
The following are nine representative events that dramatically changed fleet management in the post-1980s.
● Tax Reform Act of 1986: Without a doubt, the Tax Reform Act of 1986 was the watershed event of this era, the consequences of which are still playing out to this day. Prior to 1986, significant tax benefits prompted companies such as Dart & Kraft, PepsiCo, and Xerox to acquire existing fleet leasing companies. However, as a result of the repeal of the Investment Tax Credit (ITC), many corporate entities sold off their fleet leasing business units. Around this time, General Electric entered the market as a ready buyer and initiated a series of rapid-fire acquisitions that coalesced the industry into today’s 10 major fleet management companies.
● Emergence of Fleet Outsourcing: The second tectonic event of this era was the advent of outsourcing, which occurred across broad swaths of the U.S. economy, dramatically altering the manufacturing and service segments. In the 1980s, the trend to outsource non-core services swept corporate America. In 1986, PHH created the first-ever total fleet management program with Eastman Kodak. In-house fleet departments witnessed staff reductions as many administrative services, previously handled in-house, were outsourced.
● Women in Fleet Management: From its inception, fleet was a male-dominated industry. In fact, if you read early issues of Automotive Fleet magazine, members of the profession were commonly referred to as “fleet men.” But, as these pioneering male fleet managers retired, many of their administrative assistants, typically women, assumed management responsibilities of the fleet. This trend culminated when Helen Bland became the first female president of NAFA from 1985 to 1987 and, three years later, when Helene Kamon became the first female president of AFLA from 1988 to 1989. In 1991, Patsy Mance of Bristol-Myers Squibb became the first female fleet manager to receive the AF Professional Fleet Manager of the Year Award.
● Emergence of Fleet Sustainability: The Clean Air Act Amendments of 1990 mandated all commercial and government fleets centrally fueled and maintained, with 10 or more vehicles located in EPA-designated non-attainment areas to purchase a specified percentage of clean-fuel vehicles in MY-1998 and each year thereafter. This was the first-ever legislative mandate dictating the type of vehicles a fleet should acquire. This mandate was followed by the Energy Policy Act of 1992, which was designed to reduce the nation’s dependence on foreign oil. Among its many provisions, the Act imposed mandates to purchase alternative-fuel vehicles for federal, state, and alternative-fuel provider fleets. The fleet industry successfully lobbied the government to avoid expanding the alt-fuel vehicle purchasing mandate to private and municipal fleets.
● Fallout from the 1973 and 1979 Oil Embargos: Although both events occurred in the 1970s, their repercussions manifested throughout the ensuing three decades. Prior to this, fuel economy was not a major issue with fleets, but the subsequent decades witnessed relentless vehicle downsizing, the emergence of the minivan and crossover segments, and the transition to smaller displacement engines, to where today, the four-cylinder engine predominates.
● Personal Use Taxation Rules: Another significant change was the introduction of personal use taxation rules. The Tax Reform Act of 1984 made changes to the withholding requirements on personal use of employer-provided vehicles. This created a new and huge administrative burden for fleets.
● Web-Enabled Fleet Management: Fleet management companies began offering computerized online services in the 1980s, including online maintenance management programs and customer online access systems. In the 1990s, fleet management companies dramatically and quickly shifted to Web-enabled services. Ultimately, every service offered by fleet management companies was converted to a Web-enabled program, which dramatically increased fleet productivity.
● Creation of IRS FAVR Reimbursement Regulations: In 1992, the IRS created the fixed and variable reimbursement (FAVR) program to reimburse employees on a non-taxable basis through a combination of a monthly allowance and a per-mile reimbursement. It included projected fixed costs, such as depreciation (or lease payments), insurance, registration, license fees, and personal property taxes. The plan also covered projected operating (or variable) costs, such as gasoline, fuel taxes, oil, tires, and maintenance. In the minds of some, this represented an alternative to a company-provided fleet.
● Influence of Strategic Sourcing on Fleet Management: The emergence of strategic sourcing at major corporations in the 1990s dramatically altered fleet vehicle purchasing decisions and the supplier selection process, especially as fleet managers increasingly reported to procurement groups and followed their lead.
As these examples demonstrate, many significant industry changes weren’t of our making and were thrust upon us. Others, such as the emergence of women in fleet, enriched the industry with new talent, while technology opened the door to many exciting possibilities.
Looking to the future, we should anticipate inevitable tax law changes (with unknown ramifications), acceleration in adopting new technologies that will further alter fleet management as we know (perhaps for the better), and a changing perception by corporate management as to how a fleet should be managed.
The future bodes a continuation of these interesting times.
Let me know what you think.