In the upcoming 2002-model year, the forecast by Automotive Fleet is that commercial fleets will acquire approximately the same number of vehicles as they did in 2001. However, the mix of vehicles may change in reaction to the high cost of fuel and aggressive marketing of specific models by competing factory fleet departments. “The fleet market is shaping up to be very competitive again in 2002,” said Mike Buffi, fleet manager for MetLife Auto & Home in Warwick, RI. “Fleet managers are under pressure to keep costs as low as possible, while in the same respect the manufacturers are aggressively pursuing fleet customers.” Many commercial fleet managers are reporting extremely competitive negotiations for fleet orders among vehicle manufacturers. Also, for the 2002-model year, manufacturers are re-positioning certain models to be attractive to specific fleet segments by reconfiguring their content and option packaging. “I believe that, overall, the fleet market will remain stable or slightly reduced,” said David Edenhofer, corporate fleet manager for Farmers Insurance Group in Los Angeles. “There are still a lot of businesses that are laying off em-ployees and profits are not being made at the same levels in 2001 as they were in 2000.” In terms of Farmers Insurance Group, it is projecting to increase its fleet size by approximately 300 vehicles needed to implement increased customer service programs in its claims operation, added Edenhofer. Most fleets, however, such as E.M.C. Insurance, will be buying about the same number of units as last year. “We are not increasing our selector list for the model-year 2002. In fact, in a few situations, when a driver retires, he or she is not being replaced. Their work is being divided among those in the same department,” said Jan Cornell, fleet administrator for E.M.C. Insurance in Des Moines, IA. Likewise, Tim Wix, general manager – ground support equipment for Delta Airlines in Atlanta, reports that he plans to acquire approximately the same number of vehicles as he did last year. “We too will probably acquire the same amount of vehicles as last year,” said Kathy Jebbett, travel card and fleet administrator for Cooper Tire in Findlay, OH. “However, fuel costs are a concern.” High Fuel Prices are a Factor in 2002 Fleet Selector Decisions The high cost of fuel is becoming more of a factor in new-vehicle acquisitions for commercial fleet managers than in past years. Lynda Dinwiddie, fleet director for LabCorp in Burlington, NC, believes that many fleets are looking more closely at vehicle costs in an attempt to counteract the effect of skyrocketing fuel costs. “As a result, fleets may be looking to manufacturer incentives or depreciation rates in an attempt to defray the additional costs,” said Dinwiddie, who added that LabCorp will be buying fewer vehicles in 2002 because of these issues. Higher gas prices are also prompting second thoughts among company employees who elected to go to a driver reimbursement program. “Gas prices will continue to be a problem, and many people who have recently elected to go to the car allowance payments are now wanting to move back to a company-provided car,” said Lisa Knegg, fleet administrator for Tricon Global Restau-rants in Dallas, TX. High fuel costs will prompt some fleets “to minimize costs by downsizing vehicles,” said Tom Sours, superintendent, company fleet for State Farm Mu-tual Automobile Insurance in Bloom-ington, IL. “Fuel mileage will be more of a concern to everyone.” Agreeing is Stephen Levine, fleet manager for Pharmacia Corp. in Peapack, NJ. “Fuel prices should be playing a more prominent role, but so far I’m not really sure,” said Levine. “I’m considering recommending to management a surcharge for the less fuel-efficient vehicles. Over two years, we’ve seen a significant increase in fuel costs. Maybe we could recoup a reasonable portion.” One option considered by some fleets to minimize the impact of higher fuel costs is to keep vehicles in service an extra year to make up for the additional fuel cost. “Fuel costs are too high, and this fact is going to help fleets decide to drive their vehicles one more year,” said Gerald Cumby, fleet manager for Lock-heed Martin in Dallas, TX. “In fact, there are some financial experts in some of the Lockheed Martin facilities that are telling the transportation/fleet administrators to repair, paint, and refurbish their old vehicles instead of purchasing/leasing new ones. All of us know that repair of capital assets comes out of a different pot of money than that which is considered a capital acquisition, anything over $5,000. The main concern in these decisions is to assure that safety is the highest priority when the vehicles are reworked and placed in service.” The Need to Control Acquisition Costs is Growing in Importance The second key factor that is influencing 2002-model year purchasing decisions is the ongoing and relentless corporate pressure to control costs, especially with fleet operations. “I don’t know of any company that isn’t seriously looking at the bottom line, inventory, headcount, and all the other factors that go into profitability on an ongoing basis,” said Karen Fries, corpo-rate fleet operations manager for S.C. Johnson & Son in Racine, WI. “I think cost is going to be a big factor this year, as well as the possibility of companies trying to downsize their vehicles to economize wherever they can. Remember the days when we went from six-cylinder engines to four-cylinders to save money right off the top? My guess is we might see that same type of thing again, only using instead generous-sized com-pact vehicles to do the job that a mid-size would have filled a few years ago.” Similarly, Fries points to the high cost of fuel as influencing vehicle acquisition. “Gasoline costs are weighing heavily on everyone’s mind, and squeezing out three to four miles per gallon adds up very quickly. With all the scale-backs that every company is experiencing in all areas, fleet will not be exempt,” said Fries. One silver lining for 2002 ordering has been that interest rates have dropped more than 2.75 percent since Jan. 1, 2001. “The successive drop in interest rates from the beginning of the year has saved a lot of budgets,” said Levine. Nonetheless, corporate belt tightening is being reported by most fleets in most industry segments. “Companies are watching their pocket books,” summed up Kathy Goodwin, materials management director for FCCI Insurance in Sarasota, FL. Also, certain industry segments are being impacted by the national economic slowdown more than others. For instance, the communication industry has significantly reduced the number of vehicles it will acquire. One example is Rodger Evans, corporate fleet manager for AT&T Broadband in Englewood, CO, who said he will be buying much fewer vehicles in 2002. Another example is Cablevision. “The buzz I hear and read is all about reduc-tions in fleet spending and capital spending in general,” said Frank Felicetta, director of fleet operations for Cablevision in Bethpage, NY. Purchasing cautiousness for some companies has been ongoing. “We are being cautious in our capital dollar spend, as we have since 1999,” said Julianne Ryan, fleet administrator for Kaiser Permanente in Oakland, CA. Companies that had strong fleet buys in 2001, for the most part, said they will decrease their vehicle orders in 2002. One such company is U.S.Filter in South Bend, IN. “We plan to reduce our acquisition of new vehicles this year by approximately 25 percent,” said Brett Quigley, corporate director of fleet for U.S. Filter. “This is not due so much to the economic downturn, but rather the fact that we acquired more vehicles than normal last year as a result of several acquisitions our company had made.” Similar reasons were given by Chuck Woolard, fleet manager for Wyeth Labs; and Merrit Kinne, fleet manager for Aramark. “The number of vehicles acquired by Wyeth Labs will be substantially fewer than last year,” said Woolard, “but this is due to the major expansion that we un-derwent during the 2001-model year, not due to any cautionary measures.” Kinne added, “Aramark had large increases in the number of fleet vehicles during the last two quarters, so we feel our acquisitions will be slightly down for the 2002-model year. We believe it will be a softer fleet market in 2002.” Corporate downsizing is another factor tempering new-vehicle orders. “I see the 2002 model-year being about the same as 2001,” said Cathy Crewson, fleet manager of Tyco in Boca Raton, FL. “I think there may be more downsizing, restructuring, and layoffs yet to take place, I don’t think the economy has bottomed out yet.” However, other industry segments, such as construction, are planning to increase their fleet acquisitions in 2002. “We are expanding our fleet size,” said Ron DeAngelo, building & fleet manager for Sargent Electric Co. in Pittsburgh, PA. “We are in the construc-tion field, and many of our jobs are vehicle intensive. Although the new models for the type of vehicles we purchase have no real improvements that we are looking forward to. If anything, there are more unnecessary standard features that are raising our acquisition cost.” Agreeing with DeAngelo’s purchasing projections for the construction industry is Theresa Anderson of the Walsh Group in Chicago, a construction com-pany. “Even though the national economic indicators are that the economy has slowed down, the construction industry still seems to have a healthy backlog of construction projects,” said Anderson. “I therefore see a continuation of similar utilization and strong construction fleet acquisitions through model-year 2002.” Elsie Lucia, fleet manager for Best Foods, which was acquired by Unilever, reports that the company will be acquiring fewer vehicles due to a reduction in its field sales force due to the integration into Unilever. “We are redeploying surplus vehicles, thus eliminating new pur-chases,” said Lucia. “We will be acquiring similar vehicles to prior years with one exception; we will not be purchasing SUV-type vehicles for our field.” Lucia added that the company will continue to acquire higher-end SUVs, such as BMW and Mercedes, for its executive fleet. On the other end, Quest Diagnostics is planning to acquire more vehicles in 2002 following its acquisition of a SmithKline business unit. “We will be acquiring more vehicles then we did this year, but we have to weed out the old SmithKline vehicles we acquired in the buy,” said Arleen Molnar, fleet administrator for Quest Diagnostics in Teterboro, NJ. Gordon Food Services in Grand Rapids, MI, has also increased its fleet size due to acquisitions. “As a result, we will be acquiring more vehicles in 2002,” said Chad Roberts, fleet manager. “Also contributing to our higher vehicle acquisitions is the enforcement of policies related to months in service as company vehicles have become a stronger part of our compensation package for employees rather than simply meeting a business need.” Although the pressure exists to drive expense from a business, Kathy Kent, fleet manager for Avaya Communications in Basking Ridge, NJ, points out that fleet managers can’t afford to panic and make replacement decisions that will not benefit their fleet program in the long run. “Avaya anticipates replacing approximately 25 percent of its U.S. fleet in the 2002-model year,” said Kent. “In addition, we are projecting about a 30-percent replacement program for the international fleet.” More Fleets are Reconsidering Whether to Acquire SUVs Increasingly fleet managers are reporting that they are giving consideration to shifting fleet acquisitions away from SUVs. “There is a good possibility that there may be some shift away from SUVs because of fuel prices,” said Dick Martinson, manager – fleet operations for 3M Co. in St. Paul, MN. “3M, however, had the foresight to not go there in the first place. We have continued to stay that way.” Seconding this opinion is Sours of State Farm Insurance. “Users of SUVs may have second thoughts about acquiring these vehicles due to high costs, such as acquisition and operating, and much reduced residuals.” Adding to this sentiment is Brad Plunkett, fleet manager for Garst Seed Co. in Slater, IA. “I foresee fewer SUVs. The company is looking for vehicles with better MPG.” Other fleet managers foresee a shift from truck-based to car-based SUVs. “Fuel cost considerations and safety-related issues that have been in the news during the past six months will have the well-managed fleets reconsider the size of the vehicles they include in the selector list,” said Chris Treutler, manager of vehicle operations and maintenance for USAA in San Antonio. “I see a move away from truck-based SUVs to car-based SUVs or ‘crossovers’ and a de-mand for hybrid vehicles that use both an internal combustion engine and an electric motor.” Likewise, Sally Lewicki, fleet manager for Ace Hardware, foresees fewer sport/utility vehicles in fleets. “I see a greater increase in smaller vehicles that are less expensive in terms of fuel and maintenance.” Another factor prompting fleets to re-consider SUVs is the adverse publicity arising from the Firestone tire controversy. “All the negative focus on Firestone and Ford will cause some suf-fering on both new and used sales for Explorer and Mountaineer,” said Miller of McDonald’s Corp. “Generally, the entire SUV market will feel the impact as the safety debate on rollover contin-ues, as well as the never-ending introduction of new models and high gas prices. People are getting weary of stopping at the fuel pump two to three times a week at a cost of $40 to $50 per stop.” Miller adds: “Fleets will show a keener interest in more fuel-efficient vehicles.” Charles Bowen, fleet director for Rollins in Atlanta, GA, likewise foresees a shift away from SUVs. “With high gas prices emerging as reality, and not just a short-term phenomenon, I see a continued hard look at SUVs and other low fuel-efficient vehicles with the idea of removing them from the selector list and replacing them with more fuel-efficient models that will do the job just as well,” said Bowen. “Any resale advantage SUVs may have enjoyed has long ago been eaten up by the voracious appetite of their total operating expenses, which has only been exacerbated by the horrendous rise in gasoline prices.” Another concern about SUVs deals with corporate liability in the event of an accident. “Statistics show that people and property who have made the acquain-tance of an SUV in a crash come out much worse than encounters with autos and the like. Translation: If the company driver of an SUV is at fault, larger claims will result,” said Bowen. Manufacturers are Aggressive with New-Vehicle Incentives “I see the manufacturers being more generous with incentives and rifle shot programs,” said Suzie Hedger, corporate manager leased automobiles for Jefferson Smurfit in Alton, IL. “Although I plan on acquiring fewer vehicles in 2002, and possibly changing our replacement parameters to extend our leases to offset some of the losses I’m experiencing due to resales,” added Hedger. “I am going to concentrate on remarketing my own used vehicles through our own intranet system and concentrate on improving driver and employee sales.” Adding to this sentiment is Bowen of Rollins. “I see the manufacturers aggressively pursuing fleet business, possibly even more so than normal,” said Bowen. Agreeing is Sours of State Farm, “I see domestic manufacturers becoming even more competitive with increased allowances and services to the fleet in-dustry in an attempt to maintain dominance in the fleet arena.” Adds Richard Corsetti, car plan administrator for FM Global in Johnston, RI, “Some of the manufacturers have also sweetened the pot a little on some models by offering better fleet incentives or fleet equipment packages.” Also acknowledging this marketing aggressiveness is Sheryl Grossman, fleet manager for GE Medical Systems. “I see the OEMs being more aggressive as they pursue fleet business this fall. In discus-sions I’ve had with other fleet managers, they are being contacted continuously by the OEMs asking what can be done to do business with their company. As I have a multiple-year agreement, I do not find us in the same situations as others,” said Grossman. Shortened or Lengthened Turn-Over Schedules Impact Ordering Some companies such as Weyerhaeuser are shortening their vehicle turn-over schedule, which will increase the volume of new-vehicle orders in 2002, said David Watkins, fleet manager for Weyerhaeuser in Tacoma, WA. Likewise, USAA will acquire more vehicles during 2002, although it acquired fewer vehicles in 2001 due to a lifecycle extension for cars provided to its appraisers and adjusters, which represent the majority of USAA’s fleet. “The lifecycle extension went from 65,000 to 70,000 miles,” said Treutler of USAA. Manufacturers Reconfiguring Option Packages for Fleets One recommendation from a fleet manager is that factories be more flexible in terms of the types of vehicles offered to commercial fleets. “Manufacturers, in general, need to be more flexible and amenable to fleet needs, such as GM giving an option to delete the OnStar option on certain models,” said Lee Buttrick, field services manager for Boehringer Ingelheim Pharmaceuticals in Ridgefield, CT. “The Big Three are attempting to offer vehi-cles without all the bells and whistles in order to offer a more conservatively equipped fleet car to their customers.” Joe LaRosa, manager, fleet administrative shared services for Bristol-Myers Squibb in Princeton, NJ, sees GM making a good effort to develop fleet-only packages. “However, offering OnStar on models such as the Buick Regal can be very costly since you need to upgrade the entire package to obtain OnStar.” One suggestion on a desired option reconfiguration is offered by Allen Gilmore, manager of transportation services for Dairylea Cooperative in Syracuse, NY. “I would like to see the manufactur-ers offer a package to fleet operators that would include larger brakes, better sus-pension, and better cooling system on vehicles such as the Chevrolet Malibu, Ford Taurus, Pontiac Grand Am, and the Dodge Stratus,” said Gilmore. Many Fleets Ordered Early for 2002-Model Year One reason for the increase in early ordering for 2002 was that the manufacturers had new-product information available earlier than normal. “It was helpful that preliminary product information was available as early as it was,” said Scott Mayo, fleet manager for Wendy’s International in Dublin, OH. “We typically do not order until early August because of the lack of information.” Will Driver Reimbursement Emerge as a Future Threat? As new-vehicle prices continue to creep up from 2 to 5 percent per year and corporate pressure persists to make deep cost cuts where possible, some fleet managers are concerned that there may come a point in time when driver reimbursement begins to be seriously consid-ered as a viable alternative to the company-provided fleet. “How low do you move the bar before you can’t limbo any more?” said Jim McCarthy, director, vehicle man-agement services for Siemens Shared Services in Iselin, NJ. “Nothing is indefinite, and I believe we are fast approaching this ‘crossroad’ in the corporate fleet arena.” One fleet manager who wished to remain anonymous said this “crossroad” has already been reached at his company. He reports that four operating companies at his corporation are seriously consid-ering a driver reimbursement program in lieu of company-provided vehicles. Will There Be Greater Fleet Penetration by Transplant Models? One disappointment voiced by some fleet managers has been the lack of change in intermediate-sized sedans for the 2002-model year. “We are sure disappointed with the lack of new products in the intermediate sedan category,” said Dick Martinson, manager – fleet operations for 3M Co. “It seems all the manufacturers want to build is expensive SUVs and luxury sedans. They are leaving this whole segment to the transplants."

About the author
Mike Antich

Mike Antich

Former Editor and Associate Publisher

Mike Antich covered fleet management and remarketing for more than 20 years and was inducted into the Fleet Hall of Fame in 2010 and the Global Fleet of Hal in 2022. He also won the Industry Icon Award, presented jointly by the IARA and NAAA industry associations.

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