Each spring, John D. Kines awaits the arrival of Automotive Fleet's special issue, the magazine's annual Fact Book. As executive vice president of Associates Leasing, Inc. (ALI), Kines has grown accustomed to watching ALI move up AF's "List of Leading Lessors." Last year, ALI's 27,000 vehicles under lease or management put it in 17th place.

"It's not that we don't know where we stand among our competition, but when we see it in print, it just confirms what we already know, and, more importantly, it lends credence to our standing among industry observers," Kines says. "Our goal is to be one of the top five vehicle lessors in the United States, and, make no mistake about it, we will reach that goal sometime in the next decade."

Reaching that goal will require a considerable growth rate, but Kines is confident. "Our strategic goal is to be perceived as a leader in any business we're in. Historically, the auto side of the leasing industry has grown about 15 percent per year, so we have to surpass that figure. Our short-term goal is to be in the top 10, and we're confident that we can attain that in the next year," Kines explains. "To be in the top five, we'll have to have at least 100,000 vehicles, and we think that's a very realistic goal for a 10-year period."

ALI was started by The Associates in April 1978, after Kines was hired from Hertz Corp. the preceding August to start a heavy-duty truck and truck trailer lease program to complement the company's financing activities in those markets. When he also assumed responsibility for auto leasing operations in April, they were headquartered in South Bend, IN, where The Associates had been established in 1918 with the purpose of financing "tin lizzies."

ALI operates as the fleet leasing division of Chicago-based Associates Commercial Corp. Associates Commercial, which is a subsidiary of Associates Corp. of North America, the third-largest independent finance company in the U.S., is primarily involved in financing and leasing transportation, construction, and communications equipment. The Associates, with more than $10 billion in assets, is the principal financial services operation of Gulf + Western Inc.

"We had about 2,000 units under lease at the time we formed the division," Kines recalls. "They were mostly vehicles being utilized by various Gulf + Western affiliates. Since then, we have grown at an annual compounded rate of 25 percent, even after factoring in the four acquisitions we've made thus far in the 1980s."

ALI's growth over the past 10 years has been dramatic, rising to 40,600 vehicles under lease or management by the end of fiscal 1987, better than a 1,900-percent increase. The company has acquired about a third of those units, while two-thirds have resulted from internal growth. Today, the leasing company has a portfolio exceeding $700 million.

In late 1981, ALI made its first acquisition, purchasing the corporate fleet accounts in the Midwest, Southwest, and West of Dobbs Fleet Leasing, Inc. of Memphis, TN. Almost three years later, ALI bought Kayser Leasing of Madison, WI, which was followed in 1985 by Vandenberg Leasing of Grand Rapids, MI. Then, in May 1987, The Associates acquired Detroit-based Fruehauf Finance Co., and the leased units in that company's portfolio were transferred to ALI's portfolio. Today, ALI's operations are about 55 percent auto and 45 percent truck and truck trailers.

"That was a great acquisition within the core industry of one of our divisions," Kines says. "We've said we have to grow on both the auto and truck sides, and that growth has been split pretty evenly, although auto has received a bit more emphasis. Today, we are the number one source of capital for heavy truck financing in the U.S."

When Kines was given responsibility for auto leasing operations, he moved them from South Bend to the Chicago area within six months. Shortly thereafter, auto leasing offices were opened in Atlanta, GA; Dallas, TX, and New York City, and today, the company operates regional auto and truck sales offices in 18 major cities in the U.S.

"When we started this operation in 1978, we wanted to establish a presence in a large market, so we would be positioned for growth," Kines explains. "Chicago and other large population centers were much more attuned to fleet leasing, and, even today, such locations control the bulk of the vehicle leasing business. In our second 10 years, we intend to continue this philosophy and open additional auto leasing offices strategically placed in large metropolitan areas that we have identified as having good growth potential.

"We have set the goal to grow our auto leasing operations by at least 15 percent per year on a compounded basis," Kines continues. "And certainly some of our projected growth will be accomplished through acquisitions. We will continue to look for acquisition candidates of all sizes that will fit in with our present operations. We look at many but buy few, because we have some pretty stringent guidelines that involve profit, management, service, and client relationship criteria."

During the past year, ALI consolidated its auto leasing operations headquarters in Madison, WI. Prior to that "merging," the company had two entirely separate auto leasing operations in three locations, each with its own sales and support staffs. According to Kines, the consolidation has resulted in increased productivity of more than 50 percent on both an account-per-employee and a receivables-per-employee basis, and account delinquencies have dropped dramatically.

ALI has also invested heavily in technology. Its Vision Management System, developed over a three-year period at a cost of several million dollars, provides its clients with many direct-access services, which offer more information and faster response than the former system. In addition to national purchase and disposal programs, ALI offers vehicle management, maintenance reporting, and expense reimbursement programs that can be tailored to client needs. The company also offers a line of insurance products through its wholly-owned insurance subsidiary.

During its growth process, ALI has built a senior management team charged with developing the future success of the company. Auto leasing operations in Madison are directed by Raymond J. Stalowski, Sr., senior vice president, who joined the company when Kayser Leasing was acquired. Truck and trailer leasing operations are headquartered in Chicago under Michael J. Phelan, senior vice president, who joined The Associates in 1977. Stephen J. Larkin, vice president, directs all divisional marketing activities, and credit administration is under Richard J. Szymonik, senior vice president. The management team averages 18 years of experience, which Kines considers a strong asset.

Although consolidation of its auto leasing operations has meant improved efficiency, ALI has not reduced its client services activities, according to Stalowski. "There have been a great number of changes since I came into this industry 25 years ago," Stalowski observes. "For example, with the number of consolidations, there's been a reduction in the number of players. I think consolidation sometimes causes limitations in flexibility and quality of service. Our specialty has been in the flexibility of services we offer, and we can position ourselves for flexibility, so we can pick up some of the business that's left after these consolidations."

Stalowski says that the depth of services available and technological improvements are among factors that make ALI unique. "We have the most advanced remote access for clients from our database; we have advanced tape-to-tape maintenance records, and our fleet management services are extensive," he notes. "All these things put us a half-step ahead of our competition."

"Vehicle leasing is one of the most competitive businesses in the U.S. today," Kines adds, "and lip-service won't hold water. We've grown only because we've proved to our clients that The Associates is committed to serving their needs and providing that added value that can make a difference in their operations."

This spring, when the 1988 Automotive Fleet Fact Book is published, ALI will likely have moved up a few places on the list. The company has added several thousand auto units in the past year, and there have been industry mergers that will affect the overall standings as well.

Says Larkin, "Our major near-term growth will be related to increasing prospect awareness of ALI and increasing the client base as a result of direct sales efforts. To reach the long-term goal of being one of the nation's top five lessors, we have taken steps to provide the finest product available. We're leaning toward the mid- to high-end market right now, because we feel that volume clients would be more attracted to that end. At the same time, we've been extremely successful in heavy-duty truck leasing, and because of growth patterns in the private carrier segment, we've planned expansion into other truck segments."

According to Larkin, ALI will, in the first quarter of 1988, launch an advertising and direct mail campaign directed toward specific market segments, such as the grocery distribution industry and the beer wholesaling industry. "We have solid experience in the trucking industry, per se, because our transportation division is the largest in the country," Larkin says. "Now we are pushing for increased exposure in the private sector."

"We have two broad objectives in the marketplace," Kines explains. "First, we're going to continue to be cost-effective through the commitment of additional resources to automation, which will allow us to serve clients with increased capabilities. Second, we are going to increase our visibility in the marketplace by supporting a very aggressive advertising campaign."

ALI has put a lot of points on the board since it entered the game in 1978. However, now that the company has moved to the major leagues, it's a new ball game. ALI took the opening kickoff and quickly moved up the field. Now it's first and 10 inside the 20, where the opposing defenses continue to stiffen the closer the company gets to the goal line.

In short, it won't be nearly as easy from here on out for Associates Leasing, Inc. to improve its standing. But then, 10 years ago, who would have bet on the Chicago Bears?

 

 

 

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