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Commercial Fleet Buying Intentions Remain Cautious for 2011-MY

Corporations continue to be uncertain about the strength of the economic recovery. As a result, companies remain cautious about their fleet ordering volumes. Many are right-sizing vehicles and lengthening replacement cycles.

July 2010, by Mike Antich - Also by this author

Commercial fleets continue to remain cautious about 2011 model-year ordering, according to a survey conducted by Automotive Fleet of 300 major corporate fleets. Many companies continue to be uncertain as to whether the economic recovery is sustainable and are hesitant to recommence hiring. As a result, most companies anticipate fleet orders comparable to 2010-MY ordering, which is still below 2008-MY levels. Many are only ordering vehicles on an "as-needed" basis. In addition, delayed 2011 introductions are prompting fleets to shift some of their orders from fall fleet buys to spring fleet orders.

However, some companies are increasing 2011 fleet buys above 2010-MY volumes. One company is Kraft Foods. "We will be acquiring more vehicles compared to last model-year because we had extended our replacement parameters in 2009, which carried over into 2010, due to the volatility in the economy," said John Dmochowsky, CAFM, sales fleet manager for Kraft Foods. "Starting with 2011 model-year, Kraft Foods will revert back to its normal replacement parameters. Additionally, we will be looking at fuel-efficient SUVs for directors and above."

In many cases, companies increasing fleet ordering in 2011 purchased few to no new vehicles in the past year or two.

"We had two slow years because of the recession. I am expecting we will begin turning in older models in quantity for 2011," said Ginny Liddle, CAFM, corporate fleet administrator for Terracon.

Similar comments were made by Keith Scolan, manager, global fleet for Illinois Tool Works. "We expect an increase over last year due to holding off on ordering many vehicles scheduled for replacements," said Scolan. This comment was echoed by Maria Williams, fleet operations supervisor for USG Corp. "We will be replacing more vehicles in the 2011 model-year. For the 2010 model-year, we replaced only what was absolutely necessary."

However, despite cautious acquisition plans, most fleet managers view market conditions as improved compared to the past several years. "This ordering year will be easier than last year because we have a better idea of where all the manufacturers stand financially," said Donna Bibbo, CAFM, manager, fleet and travel for Novo Nordisk. "While there are always model introduction timing issues to overcome, a lot will depend on incentives offered on vehicles that suit the needs of my sales fleet, along with fuel-efficiency numbers, which we look to increase annually."

Although many companies will be acquiring vehicles in quantities similar to the 2010-MY, in many cases, this continues to be below their traditional fleet order volume in 2008 and 2009.

"During the 2011 model-year, our acquisition numbers will be slightly less, but similar to the 2010 model-year," said Dick Malcom, fleet administrator for State Farm Insurance. "Our 2010 model-year acquisitions were down approximately 15 percent compared to 2009."

Another fleet manager expressing similar comments is Phil Schreiber, fleet manager, North America for OTIS Service Centers. "I will acquire at least the same amount of vehicles in 2011 as we acquired in 2010. However, we acquired only 70 percent of the normal-year replacements in 2010, due to business conditions, shrinking the fleet, and extending the usage of some units with either low mileage or high capitalization costs," said Schreiber.

Some companies have not ordered new vehicles for multiple model-years.

"We have not ordered in the past two model-years, but plan on ordering for MY 2011, which will be more than the last time we ordered in MY 2008," said Kim Brown, manager, fleet & insurance for Heidelberg USA, Inc.

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