Lease Plan International: A Company on the Move

In recent years, perhaps no company has had so much said about it as has Lease Plan International... "It is phasing out its leasing operations"... "LPI is unsound financially"..."It is torn by internal dissension..."

These are but a few of the rumors heard through out the cars fleet industry regarding the mystery known as LPI.

To clear up the picture, AUTOMOTIVE FLEET went to John R. Allison, who came to LPI (now Pepsi Co, Service Industries Division) as its president and chief executive officer in March, 1967. Prior to his election as president of LPI, Allison was vice-president and controller of PepsiCo., Inc., the company formed through the merger of Pepsi Cola and Frito-Lay.

In a "no-holds barred" interview, Allison talks about the future of LPI and of the car leasing industry...

Q. What is Lease Plan Interna­tional?

A. Lease Plan International has become known to people in the automobile business as a ear leasing company perhaps be­cause it started that way. How­ever, this is but one important part of our total organization. As PepsiCo Service Industries Division, we are responsible for North American Van Lines, Chandler Leasing Corp. Na­tional Trailer Convoy, Mobilease, Whitehouse Trucking plus an on-site full maintenance truck leasing company and Exe­cutive Car Leasing Co., a 10,000 vehicle leasing business in Southern California. The com­bined assets of our division ap­proach $290,000,000.

Q. Did you have any leasing ex­perience before taking over the reins at LPI?

A. Prior to becoming president of Lease Plan in March, 1967, I had been a financial executive most of my life. As necessity, I had to deal with the subject of leasing usually in depth. As an officer of PepsiCo, I recom­mended that it lease tools of the trade to bottlers. This was the first step Pepsi took in the leasing business. Initially I did not have experience in used car disposal, reconditioning, pur­chasing or any of the other in­tricacies of the auto fleet busi­ness prior to my joining LPI. That, however, has changed.

Q. When you came to LPI, did you find the company on a sound financial basis?

A.     I found that Lease Plan was one of the most interesting business structures I have ever dealt with. When I came to LPI, I found the company was profitable and ingeniously fin­anced. Nothing has transpired to change that opinion. With the broadening of LPI's finan­cial resources, the situation has improved until I can now say, without hesitation, that the company is postured financially to accommodate our major needs in all areas.

Q. When you came to LPI, did you meet any hostility because of your lack of leasing experi­ence?

A. There was no significant hos­tility from any of the people at Lease Plan. I felt embraced and accepted. I had no problem working with the people that were there. Any rumor of strife within the company has been grossly misinterpreted and ex­aggerated. We had three key men in the organization with solid backgrounds in the auto­motive leasing industry.

Then, their company was ac­quired by a major U.S. corpo­ration and they were moved to other responsibilities that took them out of the business in which they had established a great amount of goodwill and background. These men now had a decision to make. Do they leave the company in order to retain their opportunities else­where? After weighing all the factors, the three decided to seek their fortunes with another company. As far as I know, their parting with Lease Plan was on the friendliest of terms.

Q. Did their leaving LPI result in a weakening of the manage­ment?

A. No, as I mentioned, they were moved to other responsibilities before they left the company. LPI has what I believe to be the most capable management in the ear leasing industry. Bob Tuttle, group vice president - automotive leasing has had a wealth of auto leasing experi­ence.

Mr. Tuttle was formerly vice president and general manager, marketing division and vice president - general m a n a g e r of ear leasing division of Avis Rent-A-Car, Inc. Prior to that time he was vice president general manager of a heavy equipment leasing subsidiary of James Taleott, Inc., and before that had management responsi­bility with the Hertz Corpora­tion.

Ray Deedon - operation vice president has been with LPI for II years. His career with the company has permitted him to work in practically every phase of our automotive and truck leasing business including sales, operations, both wholesale and retail, manager of several retail branch offices, used ear dis­posal, and now as the opera­tions officer of LPI. Before join­ing LPf, Ray was part of the management team of Reo Trucks. I can think of no one more uniquely qualified for his responsibility than Ray Deedon.

Walter Belleville, sales vice president has been with LPI for almost four years. He has been sales vice president since 1967. Walter's sales leadership has been of tremendous significance in broadening the base of LPI clients. Recently signed ac­counts include: Texaco, Inc., Air Products & Chemicals, Inc., Dennison Manufacturing Co., and Revlon, Inc. I might add that LPI has strength and lead­ership in all its operating areas.

These men have been inno­vators in all aspects of their business careers, and I look for­ward to even greater accom­plishments from our automotive leasing organization.

Q. Is there a possibility that LPI may phase out its leasing oper­ations or may concentrate its efforts on the leasing of equip­ment rather than automobiles?

A. In view of my earlier com­ments, I think you can see how important automobile leasing is to PepsiCo. It has been almost exactly one year since Bob Tuttle was hired to head up our automotive leasing companies. In that time he has accomplish­ed much. First, he has computer­ized LPI purchase and disposal services. This results in a con­siderably more efficient handl­ing of our clients' car purchases and used car sales. Next, car leasing has expanded through the creation of regional offices and increased its service capa­bilities.

Q. What do you mean by regional service offices?

A. Our regional service centers operate basically as an account executive system similar to ad­vertising agencies. We have a local account service represent­ative that works with a client from the day he is first con­tacted by Lease Plan. It is the job of the service representative to handle the day-to-day prob­lems of the client. In order to do this, we have expanded our staff and have opened branch offices in Los Angeles, New York, Cleveland, Atlanta, Dallas and Chicago. All these offices are service locations. For the first time, we now have service capability on the West Coast. And for the first time, we have administrative and service capa­bility throughout the country where previously only sales ca­pability was available. In addi­tion, we now have a regional­ized system of organization instead of a centralized one. This was done for one purpose: to give the client more per­sonalized service.

Q. Does this mean LPI is going to change its sales approach?

A. We believe that fleet leasing has been sold on perhaps an inappropriate premise. In the past, fleet leasing has been sold mainly on its financial benefits -how it conserves capital; how it helps avoid dilution of stock­holders' equity; how it permits the borrowing of additional funds without disturbing exist­ing credit lines. Today's finan­cial executive is more sophisti­cated. He thinks beyond the basic dollar arrangements. He's continually searching for meth­ods to simplify, as well as re­duce the cost of his operation. In a word, he's looking for serv­ice. And service is what Lease Plan gives him. The current philosophy at LPI is that the selling job is never done. When a client signs a contract that is only the beginning. The old LPI concentrated on the hard sell-get the name on the con­tract. Now, that's just the first step. With our newly initiated regional service offices, plus an electronic data processing sys­tem that we feel is unique in the industry, we can offer the service that we feel is so vital to a growing industry.

Q. Why do you feel that Lease Plan's EDP system is unique?

A. Our biggest dollar investment in customer service has come in the area of electronic data proc­essing. Everything that we do for the client is EDP. Our EDP works in two areas; the first is in the so-called cost control service which is provided to our clients; second is in the internal operations of LPI. This latter area is designed to provide in­formation on a daily basis so that we can deal with problems before they become serious. We also have developed an EDP system that will provide us with day-to-day information on what is happening to each and every car in our fleet. This will help us with reconditioning, where to sell our cars, and by what method. Most companies use EDP as a historical reporting tool, something to compare last year's performance with this year's. We use EDP in our day-today operations to find out ways to reduce our clients' costs by increasing LPI's operating efficiency.

Q. Speaking of used car disposal, what is Lease Plan's policy in this area?

A. We now employ people who are used car specialists. We call these personnel used car coor­dinators. Each coordinator is backed by a staff in each region of the country. These specialists are constantly made aware of the total market possibilities in their respective regions and maintain a flexible posture where they coordinate the sales of cars. All available markets in the sale of used cars; auction, new and used car dealers, wholesalers, and LPI clients, are used as sources of disposal. We are constantly finding new markets which will pay top dol­lar. A typical example of the type of men who are used car coordinators, are the two most recent additions to our staff in this particular area. Len Swee­ney and Don A. Grant are now involved in   used car disposal in our Northeast region. Be­tween those two, there is a total of nearly 30 years in the auto­motive and leasing fields. These men know used ears and how to get the most money for them. After all, a major advantage of leasing is in reality the leasing companies' expertise in selling the clients' used car.

Q. What kind of profit picture did the company have in 1968?

A. All of our figures are not in, of course, but early indications point to one of our best years ever. We will have a net in­crease of 7,500 units on the road. This will mean a total im­pact of approximately 15,000 units annually. As good as '68 looks, Bob Tuttle has even higher hopes for I969.

Q. Is there such a thing as a key to successful fleet leasing?

A. I personally see three keys to the success of fleet leasing. One is service-service in every as­pect of the fleet lease relationship. Two, is a close partnership between the national lessor and the dealer who has the means of offering local customer serv­ice. And three is the dealer lessor's concentration on his local market. Of these three, service is the most important as far as Lease Plan is concerned.

Q. Are there any lawsuits pend­ing against LPI?

A.   No.

Q. What do you foresee as prob­lems facing the car fleet indus­try in 1969?

A. Fundamentally, insurance is an increasing problem. I think however, that anything that would happen in the way of legislation regarding insurance would be much longer in com­ing than next year. The histori­cal monthly depreciation rate of 2 per cent might bear some looking into in 1969. As a stand­ard, the 2 per cent figure can be inadequate. You must know intimately what is the best car and the right equipment and you have to be sophisticated enough to put the car in at the right time, take it out at the right time and at the right mile­age. You simply have to know how, where and when to dispose of cars to realize a 2 per cent monthly depreciation and most people are not that good.

Q. What about the growth of indi­vidual leasing? 

A. I think because of the lack of meaningful statistics, it is al­most impossible to predict the growth of individual leasing. A recent projection of 1,000,000 or more cars a year being leased to individuals can't be realized unless our industry can reach the masses who are accustomed to financing car purchases. These potential customers will only be attracted in numbers if our approach permits a lease payment structure, approxi­mately the same as that used in retail new car financing. This mass market poses a major fi­nancing problem for our indus­try. At present, there's no solu­tion. Right now it appears as if growth can only occur in pro­portion to the availability of credit and cash resources for leasing companies.

Q. Does this belief influence your basic thoughts about finance leasing?

A. No, finance leasing has an­other problem. Historically, our industry has placed finance leasing at one end of the spectrum and sold it primarily with refer­ence to cost advantage. Main­tenance leasing is at the oppo­site end and has been sold pri­marily on the basis of service advantages. This division, as I see it, is a serious error and it should be remedied. Mainte­nance leasing, as well as net and limited full maintenance leas­ing, should be considered as ex­tensions of the finance lease be­cause they increase the leasing company's contractual level of service. Assuming the risk of obsolescence, under a net or maintenance lease is just an­other component of a lessee's service. By presenting all these services to the prospect, you make a lease available that is truly tailored to his require­ments. There's nothing altruistic about this . . . it's just good business.

Q. How does LPI plan on increas­ing its penetration into the fleet leasing market?

A:  Our plan is simple. We will present the fleet user with serv­ice that is above any level he could provide himself or that is available from other companies . . . LPI service.