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Commercial Fleets Reveal 2010-MY Buying Intentions

Many commercial fleets deferred fleet orders in 2009 and need to “play catch-up” with their replacement schedules for 2010 ordering. However, many fleets are delaying finalization of 2010 selectors due to market uncertainties.

July 2009, by Mike Antich - Also by this author

Fleet ordering volume for the 2010 model-year is shaping up to be higher than last model-year, but that's not saying much since 2009 was such an abysmal year. This assertion is based on responses from commercial fleet managers to an informal e-mail survey, conducted in early June by Automotive Fleet magazine, assessing 2010 model-year commercial fleet ordering intentions.

Many commercial fleets responded they will order more vehicles in 2010 than last model-year because they had deferred or substantially decreased 2009 ordering. Some fleets did not purchase replacement vehicles in 2009. One such fleet is Cablevision.

"We didn't purchase any vehicles in 2009 and have not yet started our budgeting process for 2010, but my feeling is that we will go back to our normal purchasing cycle of 400-500 vehicles for the 2010-MY," said Frank Felicetta, director - fleet operations for Cablevision in Bethpage, N.Y.
Another fleet that skipped the 2009 ordering cycle was Johnson Controls, Inc.

"Since Johnson Controls acquired no vehicles in 2009, I anticipate we will increase that number for the 2010 model-year," said Christy Coyte, global fleet manager for Johnson Controls, Inc., in Plymouth, Mich.

A significant number of commercial fleets reported decreased volume in 2009 ordering and are now "playing catch-up" to replace a larger pool of vehicles with higher than normal mileage in the 2010 model-year.

"The estimated level of vehicle purchases in 2010 will be 600-800 vehicles. We only replaced 500 units in 2009, and as a result, we are behind in our replacement schedule," said Phil Schreiber, fleet manager, North America for OTIS Service Center in Bloomfield, Conn.

Another factor that influenced the 2009 order volume decrease was the soft resale market. Some fleets elected to hold vehicles another year rather than take a resale hit in the wholesale market.

"Our average annual ordering volume is around 900 units. For 2009-MY, we only ordered 450 units due to postponing individual vehicle replacements expected to sell below book value. For 2010-MY, we are planning to order 500 units. The units we will be taking out of service will have over 65,000 miles, but are expected to show a positive return on sale," said Charles Szymanski, manager, Global Property Casualty Insurance & Auto Fleet for PPG Industries in Pittsburgh.

Another company looking to adopt a similar remarketing strategy is Iron Mountain. The resale market for commercial trucks continues to be weak. Boston-based Iron Mountain is looking to defer replacements until next year, hoping to weather the currently soft resale market for Class 3-6 commercial trucks.

Other commercial fleets decreased 2010 ordering because they changed replacement parameters and are keeping vehicles in service longer.
As a result of deferring 2009 replacements, many models taken out of service have much higher mileage. "We have higher than normal mileage on our vehicles because we didn't order in the 2009 model-year. I'm hoping to place my 2010 orders in July," said Suzanne Fischer, fleet administrator for Dreyer's Grand Ice Cream, Inc. in Oakland, Calif.
Another important influence on 2010 fleet ordering volume will be the strength of the economy.

One Fortune 100 fleet feeling the brunt of the recessionary economy indicated its 2010 fleet orders will "probably decrease by approximately 25 to 33 percent."

On the other hand, if signs of a strengthening economy appear later in 2009, many fleet managers indicated their companies will renew hiring. This will cause a corresponding need for additional company vehicles.
"Whether or not we acquire more vehicles depends on the economy. If we need to hire more, we'll buy more. Otherwise, we will only see a slight increase in our 2010 orders," said Julie Bromley, fleet director for Reedy Industries, Inc., headquartered in Glenview, Ill.

Another company whose 2010 ordering will be influenced by the state of the economy is Brown-Forman Corp.

"At the present time, it appears we will be ordering less. However, if economic conditions improve over the summer months, we may need to hire more, which will require us to order more vehicles to meet our needs," said Mary Pat Crabtree, fleet & relocation specialist for Brown-Forman Corp., headquartered in Louisville, Ky.

Despite the recessionary economy, some fleets anticipate substantial increases in 2010 fleet orders. One such fleet is Endo Pharmaceuticals, which reported it will acquire more vehicles in 2010. "This will probably be the heaviest order year yet," said Joe Niszczak, fleet manager for Endo Pharmaceuticals, headquartered in Chadds Ford, Pa.


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