50 Milestones in Fleet Management
As Automotive Fleet celebrates its golden anniversary, we look back on the milestones that have changed the fleet management industry since its inception.
This article was sponsored by Ford Fleet.
In the late 1930s and early 1940s, businesses started to migrate from salespeople reimbursement to company-owned fleets. Since then, 50 significant milestones have dramatically changed the nature of commercial fleet management.
1 - Automotive Fleet Magazine Created: Many events have affected the commercial fleet industry, one of which was Automotive Fleet’s founding. In 1961, Ed Bobit founded the magazine in Glenview, Ill., establishing Bobit Publishing (now Bobit Business Media). Thanks to a timely insert from Ford in the premiere issue, Bobit had sufficient funds to produce the second issue, and the rest is history. AF published its first Fact Book in 1967. The company moved to California in 1977. Since AF’s inception, a suite of fleet-related sister magazines have emerged: Fleet Financials, Government Fleet, Work Truck, Business Fleet, Auto Rental News, Business Driver, and Vehicle Remarketing.
2 - Higher-Content Fleet Vehicles: In the early days of fleets, companies had a choice of three models: Ford, Chevrolet, or Plymouth. The typical fleet car was the standard model with minimal equipment. The biggest selector deliberations were over the economies of installing a radio or adding air conditioning for vehicles located below the Mason-Dixon Line. The “Plain Jane” fleet car became a historical footnote as OEMs bundled options into packages, allowed free-flow option ordering, and proved that higher-content fleet vehicles sold better in the resale market.
3 - Creation of the Open-End Lease: Early lessors offering full maintenance leases were R.A. Company, established by David, Harry, and Nathan Robinson, and Four Wheels, founded by Zollie Frank and Armund Schoen in 1938 and incorporated in 1939. Changing conditions in the 1950s led to the development of open-end or finance leasing, which PHH offered in 1951. Fleets wanted the ability to replace units after a 12-month period with off-balance sheet reporting. In 1981, the Swift Dodge vs. IRS court decision legitimized the use of the TRAC clause in an open-end lease.
4 - Factory Ordering: Before the advent of OEM fleet departments, companies purchased vehicles from individual dealers. Use of dealer ordering codes by non-dealers, such as fleet lessors, allowed factory-direct orders. Another factory innovation was the introduction of fleet previews to provide new-model specifications to facilitate vehicle replacement planning.
5 - Drop-Ship/Courtesy Deliveries: In the late 1940s, the concept of volume drop-shipping fleet vehicles was developed. At that time, PHH factory-ordered vehicles delivered to drivers by local dealers. Wheels and McCullagh (acquired by GE) started delivering cars from regional dealers directly to drivers. Ultimately, it became an accepted industry practice to pay a courtesy delivery fee to non-ordering dealers to deliver and prep vehicles.
6 - Development of National Account Programs: The first recorded purchase of a fleet management program, other than leasing, was by Gibson Art in 1946. Tire company national account billing started in the early 1950s. PHH, Consolidated Service Corp. (acquired by LeasePlan), and Mileage Consultants started selling tires nationally using centralized billing. Other programs, such as maintenance management, were not in great demand because gas was cheap and operating costs were manageable. This gradually began to change in response to market demands and new fleet services proliferated, such as fuel management, accident management, and personal use reporting.
7 - Repeal of the ITC/Lessor Consolidation/GE’s Entry into the Fleet Leasing Market: Prior to the Tax Reform Act of 1986, significant tax benefits prompted companies such as Dart & Kraft, PepsiCo, and Xerox to acquire existing fleet leasing companies. However, as a result of the repeal of the Investment Tax Credit (ITC), many corporate entities sold off their fleet leasing business units. Around this time, GE entered the market as a ready buyer and initiated a series of rapid-fire acquisitions that coalesced the industry into 10 major fleet management companies.
8 - Outsourcing of Fleet Management Services: In the 1980s, the trend to outsource non-core services swept corporate America. In 1989, PHH created the first-ever total fleet management program with Eastman Kodak. In-house fleet departments witnessed staff reductions as administrative services were outsourced to third-party vendors. Outsourcing also changed the skill set required of fleet managers. In the profession’s early years, most fleet managers had technical or automotive background. As these fleet managers retired, a new generation of fleet managers emerged, whose backgrounds were financial, administrative, or managerial. One reaction to total fleet outsourcing was the introduction of “unbundled programs” for commercial fleets by some fleet dealers.
9 - Development of OEM Incentive Programs: In the early days of fleet, the standard fleet discount was a dealer-negotiated 10-percent-off list. As competition grew, OEMs developed more complicated incentive programs, such as guaranteed depreciation protection and “rifle shot” programs offering tiered volume pricing. Also, OEMs introduced holdback for dealers, which were often rebated to fleets. In the early 1980s, OEMs started negotiating unique and substantial incentive programs directly with individual end users. Prior to this, fleet programs were identical for all fleets.
In the daily rental market, OEMs developed special buyback programs. These rental vehicles were depreciated at a set monthly rate and then bought back by the OEMs for resale after a minimum in-service period.