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Fleet Manager Reaction 'Wait & See' to Fed Plan for GM & Chrysler

March 31, 2009

TORRANCE – A survey of U.S. commercial fleet managers indicates they are taking a "wait and see" approach to the Obama Administration's recently announced "finite path forward" for troubled automakers General Motors and Chrysler.

President Obama announced March 30 the required viability plans GM and Chrysler submitted as a term of December's $17.4 billion federal aid package were "insufficient to justify a substantial new investment of taxpayer resources" and promised a sweeping overhaul of the companies.

Citing the administration's commitment to the American auto industry, "the backbone of our manufacturing base," the President's Task Force on Autos is giving GM 60 days and Chrysler 30 days in which to make a final effort in proving their businesses can be viable. The companies will be funded in the interim.

The administration held out the possibility of a "structured bankruptcy," but pledged to "stand behind new cars purchased from GM or Chrysler during this period through an innovative warrantee commitment program."

Automotive Fleet surveyed fleet managers whose fleets included a significant percentage of GM vehicles regarding the impact of the government's actions on their fleet operations, in particular vehicle acquisition plans. Most responded that while concerned, they will watch and wait for further developments. In addition, the news does not impact 2009 vehicle orders, already completed for most respondents.

The fleet manager for a large insurance company with more than 3,500 vehicles, who spoke off-record, said, "We've ordered all of our vehicles for model-year 2009 already, so I'm confident those will all get built and delivered, even if there is a Chapter 11 bankruptcy, etc. As for model-year 2010, we have a backup plan in place, should GM not be available to us, and that would be Ford."

The government's announcement "creates concern, but not alarm," said Charles Szkmanski, global fleet manager for PPG Industries. "PPG and GM have worked very well together for several years...We are communicating with GM and they are providing what information that they can on a very timely basis." Szkmanski supervises a fleet of approximately 2,500 vehicles.

For the 2010-model introduction, Szkmanski said he will "solicit bids from several manufacturers to ensure that PPG maintains a competitive program. GM's history with PPG is important, but it still must remain competitive. If significant issues arise, as we progress through the year, we would be prepared to evaluate other manufacturers as well. Warranties are important, but I would put sourcing and pricing at a higher priority."

Donna Bibbo, manager, fleet & employee services for pharmaceutical company Novo Nordisk, reported moving to a broader mix of vehicles on the 2008 fall selector, in response to driver input.

Of her spring 2009 order, "only a handful have yet to be scheduled to be built," said Bibbo. "So I think we're in pretty good shape for the 2009 model-year."

She added, "I will, of course, keep a real close watch on these vehicles."

In addition, Bibbo is working closely with her fleet management company, Wheels, regarding dealer closings. "Although a couple of dealers where vehicles were scheduled to be delivered through closed, we were able to catch them in time and move those vehicles, so we have had no problems. My drivers have been very vigilant on this front also."

Bibbo will continue to monitor auto industry actions and develop contingency plans as events occur. "I am worried about the warranty coverage and availability of spare parts should a bankruptcy occur. I am also worried about what will happen to the second- and third-tier suppliers should this happen.  I expect a lot of them will also have to file bankruptcy and that could be even more disrupting than the filing of GM or Chrysler."

Key to getting through this period, said Bibbo, "will be vigilance, flexibility, and contingency planning...I certainly feel that I'll earn my stripes as a competent fleet manager in getting through it. We have been keeping our drivers as up-to-date as possible with developments, and I think clear communications with them will be crucial in gaining their support in whatever plans we make going forward."



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