Arbaugh Seeks Industry Unity To Slow Feds

Editor's note: This article was originally delivered as a speech by Eugene Arbaugh, senior vice president of the Fleet Management Services Division of PHH at the recent annual meeting of the Automotive Fleet and Leasing Association.

 

I guess it is standard operating pro­cedure for a person like myself, representing a large fleet management com­pany, to preface his remarks with some words to the effect that he is talking from a particular point of view; that what he has to say about the is­sues of the day, are to be understood as a "lessor's" reaction.

Well, we've never liked being called "just a lessor" and when you really think about it, one of the most chal­lenging things that has happened to us recently is that today there are very few issues that affect only fleet man­agement companies, or only dealers, or only lessees.

All of us, regardless of our responsi­bilities within the fleet industry, are equally affected by what takes place in our total environment. When I was asked to speak here today, I said my subject would be "Fleets, State of the Art." Well, when I began to prepare my talk, I just could not bring myself to talk about the fundamentals of fleet administration when we face so many Problems which affect all of us.

Today, the interrelationship of gov­ernment regulations, bureaucratic edicts, and free-market sectors has created an interdependence among all of us.

In the government area alone, look at what has happened or is about to happen.

The Department of Transportation is actively enforcing the Federal Odo­meter Law.

The Federal Trade Commission is involved in used vehicle rulemaking proceedings.

State laws affecting vehicle taxes and registration requirements are con­stantly being changed.

Federal laws controlling miles per gallon and environmental standards on air and noise pollution are increasing.

Government policy on interest rates, the investment tax credit and other monetary policy are in a state of flux.

There are regulations on truth in lending and, yes, even regulations on truth in leasing.

All of these issues affect all of us and they will have a direct bearing on the way each of us will do business in the future. And, this is not the end - ladies and gentlemen - this is just the beginning.

The future will see more of this, so the sooner we begin to think of our­selves as an identifiable business with common interest, the easier it will be to take a common stand on the major issues confronting our business.

The reaction within our industry to the FTC's proposed used car disclosure regulation is a case in point. Under the worthwhile banner of consumerism, the bureaucrats are charging ahead to protect the used car buyer.

Congress originally passed a law to protect the used car buyer from false warranty statements - a worthwhile goal, but the FTC has decided that the way to establish used car warranties is to make the dealer tell the buyer the car's complete mechanical history, in­cluding its prior use.

Now, it would be helpful for the average consumer to know that a vehi­cle was used as a police car or a taxi, but the method of financing that vehi­cle is absolutely not material. Leasing is a form of financing, yet the FTC wants to classify leasing as a form of use.

Let's look at an example of how unfair this classification can be. We could have three salesmen, all driving identical cars the same number of miles each year, and all maintaining their car properly.

Salesman number 1 owns his car and receives $.15 per mile from his company.

Salesman number 2 drives a car leased from Long Chevrolet, by either his company or directly as an individ­ual.

Salesman number 3 drives a car owned by his company.

Under the FTC's proposed rules, if these three cars were lined up, side by side on a used car lot, the leased car would not be worth as much as the other two.

According to the FTC, the public believes that leased cars are bad buys. Does the public really think that "leased" cars are the same as police cars or taxis?

A lot of us have told this to the FTC in writing and at oral hearings. PHH has been working with several groups to help get the story across to the FTC: to tell them that there's already an odometer law; to tell them that listing all repairs over $100 does not help establish warranty standards on used cars; that the record keeping, required by the regulations, will in­crease the cost of leasing to the con­sumer. But, maybe we have another story to tell to the American people - and we ought to tell it as individuals, as companies, and as trade groups.

Every fleet administrator and most car dealers will agree with me when I say that the average fleet vehicle is in as good - if not better condition at sale time than the average privately owned car.

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Just consider with me the following facts:

1. Lessees have a very real economic incentive to maintain their vehicles in top running order. Lessees are aware that expenditures for quality maintenance are eventually returned in the form of higher resale prices for the used vehicles which results in a reduction in overall leasing costs. Also, leased cars are tools to perform a job. Downtime costs both the company and the driver money, so both have an incentive to maintain the car.

2. Since the driver's company is paying - maintenance and repairs are generally made sooner and more com­pletely.

3. Unlike privately owned vehicles, most fleet leased cars are on a strict maintenance schedule.

4. In addition to company use, many "company" cars are used by the drivers as a "family car" - adding further incentive to keep the vehicle in a safe and reliable condition.

The public is not aware of these facts - a stigma exists whereby the public views leased vehicles as vehicles which are run into the ground and not maintained because the driver does not own the car. We must work together to change the image of the cars we buy, own and sell.

And, if you think we have problems, just look at the automobile manufac­turers. They are faced with even bigger problems for the new model year. The federal pollution control standards, as now written, would prohibit the pro­duction of virtually all 1978 model cars.

Unless Congress acts quickly, there will not be a 1978 model year. Think about that for a minute. Not only would you and I be out of a job, has one out of every five workers in this country would be affected.

Now, I'm not against pollution con­trols, but can we really legislate tech­nological progress? And if so, how much technology can we demand all at once, and at what price?

In addition to pollution controls, we also have a "law" pertaining to miles per gallon performance. Accord­ing to the Federal Energy Act, the manufacturers must produce a model mix that performs at 18 mpg in 1978 - and by 1985, that model mix must produce a 27 mpg average.

As fleet managers, we are certainly in favor of improved gas mileage. Gas­oline is our single biggest cost today - even more than depreciation. But, how many laws can you pass and enforce - all at the same time? Vehicles, cars, trucks and engines are real - not theoretical.

The way our government works, we'll soon be hearing from OSHA, or some other government agency, that employees should not be allowed to drive small cars on company business because, according to some people, they are not as safe as larger cars.

For years, PHH has been referred to as the "Sleeping Giant" in Baltimore. Historically, we have been non-joiners in the past, this did not present a problem - we have an in-house staff of attorneys who review all proposed state and federal legislation affecting cars, trucks and leasing. Each year, we got involved in fighting the two or three proposed bills, regulations or ad­ministrative rulings which had an im­pact on our industry. Well, this is no longer possible - just look at the mag­nitude of the problems today.

The Department of Transportation with virtually unlimited resources is is­suing regulations covering enforcement of the odometer law.

The Financial Accounting Standards Board is issuing rules to govern ac­counting for leases.

The Federal Trade Commission is issuing administrative rulings governing the sale of used vehicles.

The Federal Energy Administration is controlling minimum miles per gal­lon and pollution standards.

Every state is passing laws - taxing either the sale of the vehicle or the lease transaction.

Every state department of motor vehicles is involved in the titling, reg­istering and reregistration of leased vehicles. Many states discriminate against leased vehicles in the form of higher fees, higher taxes and more stringent requirements for information and insurance.

Virtually every state is looking into the control and taxation of leasing and leasing companies.

This list continues to grow every day:

The Federal Register reported that Brock Adams, Secretary of the DOT has offered three alternatives on occupant crash protection, and the Carter Administration announced a plan that would tax large cars up to $500, and/or give $500 tax rebates on small cars.

Today, we continue to fight many state and local battles. Last month, for example, we successfully participated in the fight against Maryland Senate Bill 413. If it had been passed, this bill would have doubled the registra­tion fee for leased vehicles over that of non-leased vehicles.

In addition to our individual acti­vities, PHH has accepted its responsi­bility to our industry. We have joined AALA (The American Automobile Leasing Association) and we have been working very closely with it on the FTC Used Vehicle Proceedings and other problems. I thank John Blessing for his persistence and patience in getting us involved with AALA. We participate in state CATRALA and NAFA and, yes, we are here today talking to AFLA.

Now, let me ask you a question - what are you doing?

At this convention, you have panels on Odometer Enforcement, Used Car Disclosure, The Money Dilemma and Insurance. And, it is good to have these discussions among yourselves. But, what have you done outside of AFLA?

We must all use whatever influence we have as business people and as individuals, to assure that our industry is not regulated out of business.

Many of you represent dealers. On the new car side, the dealership is represented by NADA. Who represents the dealerships on the fleet and leasing side? NADA is a very powerful organi­zation - use your influence to get NADA involved in matters affecting leasing.

AALA and CATRALA are both strong, influential organizations repre­senting the leasing and rental industry on both the state and federal levels. Both of these organizations need our support to get our story across to the government and to the public.

AAMVA (American Association Motor Vehicle Administrators) is a very active organization of the state motor vehicle administrators. Working with AMVA, we have participated in drafting uniform title and registration documentation for adoption by various states.

Now, don't sit there and say to yourself that you can't influence change, because that's not so. The real power is with the people - and we are the people. And if you don't believe that is true, think about prohibition, state lotteries and, yes, even the igni­tion interlocking front seat belts, and I think you are seeing the people speak out again - this time on saccharin.

Stand up and speak out for our in­dustry - both as individuals and as AFLA. We cannot sit back and allow everyone else to regulate and run our business. Each and everyone of us, working together, can influence and bring about change.

And that's really my message today! Each and everyone of us, working to­gether, can influence and bring about change. I thank each and everyone of you for standing up and being counted.