“There are no major changes planned to the makes and models that will be added to the fleet for 2007. But we will look closer at mpg,” said Greg Asa-doorian, director – global fleet for Invensys in Foxboro, Mass.
A number of other fleets also indicated that they would pay closer attention to a vehicle’s mpg as a selector criteria. “We have determined we will have a minimum miles per gallon requirement for all levels. Vehicle selection must meet this set mpg number, and vehicles must meet specific safety requirements, such as front and side impact airbags and ergonomic requirements,” said Lee Miller, manager, fleet services for Boehringer Ingelheim Pharmaceutical in Ridgefield, Conn.
Another manifestation of the heightened concern about fuel prices is reflected by the deletion of SUVs from corporate selectors. “There will probably not be any significant changes in any of our group selectors for MY2007. However, large, and even smaller SUVs, will probably not make most of our selectors,” said Jim McCarthy, director, vehicle management services for Siemens Shared Services in Iselin, N.J.
Fleet manager are also evaluating different vehicles than what have traditionally been offered on their selectors. “We will be evaluating many different vehicles. For example our typical vehicle is a mid-size sedan (Impala, Grand Prix, and Charger). For 2007 we will be evaluating the HHR, G6, and other models in that category to possibly give us a different mix, and maybe better fuel economy. This is very preliminary at this point in time and no decisions have been made,” said Jackie Barrett, fleet/administrative service manager for Valspar in Minneapolis, Minn.
Another company making similar deliberations is Pfizer Inc. “We plan to acquire about the same number of vehicles as last year, around 4,000-4,500, depending on how many award vehicles we have,” said Ed Oleksy, director – fleet services for Pfizer Inc. in New York City. “We have just started our RFP process. We are predominantly a sedan fleet, which includes Impala, Ford Five Hundred, and Chrysler 300-sized vehicles. We will also be looking at the Malibu, G6, Sebring, Fusion sized vehicles, but don't know yet if we will change. These models offer better fuel economy, lower costs, but we have to make sure these vehicles can do the job for us. We are evaluating this option and will discuss it with sales management,” said Oleksy.
Not only are different models being considered but also different replacement cycling parameters. “I anticipate changes for our fleet in 2007. We have been evaluating our entire replacement criteria including short cycling at 12 months to extending to 75,000 miles. In addition, we're investing in more fuel-efficient models that will meet our business need,” said Jim Anselmi, director, fleet operations & travel for Lorillard Tobacco in Greensboro, N.C.
The resale market, along with 2007 incentive dollars, is also influencing fleet managers as to the number of vehicles they plan turn.
“Due to strong resale market conditions, we plan to purchase about the same. However our volume will change if the market fluctuates to the down side. Those dynamics coupled with large incentive dollars on current models across a multi-year agreement, creates a strong argument for an early turn and replacement of a portion of our current fleet,” said a fleet manager who wished to remain anonymous.
Business is Good
Some fleets are expanding the number of vehicles they plan to acquire in 2007. “We are planning an expansion of our field sales team and it will triple our order for 2007,” said Joe Niszczak, fleet manager for Endo Pharmaceuticals in Chadds Ford, Pa. “In 2005 and 2006 we offered a mid-size crossover vehicle to all sales representatives; however, for 2007 we will move to a more cost-effective Subaru model, probably the Forester.”
Monsanto likewise plans to increase its fleet buy. “We are planning to buy more vehicles, as our business has expanded,” said Kellie Duenke, CAFM, team lead - expense & fleet management for Monsanto Company in St. Louis, Mo.
Another company looking to expand its fleet is Ecolab. “We are planning to buy more vehicles. There will be about a four percent fleet growth in the U.S.,” said Gayle Pratt, fleet manager – global operations for Ecolab in St. Paul, Minn.
The same is also true for Andersen Corp. “We are planning to buy more vehicles for the 2007-model year,” said Rita Knolls of Andersen Corp.
Another factor that will be driving 2007 fleet sales are companies with driver reimbursement programs that are now offering employees the option of choosing instead a company-provided vehicle.
“FCCI Services, Inc. greatly reduced our fleet in 2002 when we moved our field employees from company-provided vehicles to an allowance program administered by an outside vendor,” said Cindi Armstrong, fleet administrator for FCCI Insurance Group in Sarasota, Fla. “Our current fleet consists of executive vehicles, department vehicles and pool vehicles only. We are in the process of changing our current policies to allow us to offer field employees the choice of an allowance or a company-provided vehicle. The program has not yet been rolled out; so we don't know how many additional company vehicles will be needed,” added Armstrong. “Besides the Toyota Camry LE models utilized for our passenger fleet, we may be adding a few 2WD and 4WD Ford Explorers for special use in rough conditions.”
Some fleets are reducing their fleet buy for 2007 because they had larger than normal purchases in 2006. “We had a big 2006-MY buy, so 2007 will be slightly less than normal,” said Sheryl Grossman, fleet manager for GE Healthcare in Milwaukee, Wis.
Another company in a similar situation is Kellogg. “We plan to acquire fewer vehicles as we expanded our replacement strategy with the 2006-MY. However, with that said, we are reviewing the possibility of shortcycling some of our newer vehicles which may increase the number,” said Brett Quigley, senior manager of fleet for Kellogg Company in Battle Creek, Mich.
The Cost of Fuel is Worrisome
A key concern for fleet managers for the past several model-years has been the high cost of fuel and the 2007-model year is no exception. “Everything pales next to the concerns about high fuel costs,” said Sam Alfano, director of fi-nance and accounting for Cook’s Pest Control in Decatur, Ala.
Some fleets are using technologies such as GPS to reduce fuel expenditure. “We have had really good success in managing fuel expense by working diligently on managing our mileage. We've accomplished this with GPS and route scheduling,” said Charles Bowen, fleet director for Rollins Inc. in Atlanta, Ga.
The increased cost of oil is also impacting prices of other products that are petroleum-based byproducts. “The rising price of fuels is constantly on our minds, so we hedge as a corporation. But it is not only the price of gasoline, it is the price of all oil-based products, which is causing maintenance and PMs to go up, and tire prices are also increasing,” said Grossman of GE Healthcare. Not only is the high price of fuel a concern for fleet managers, but it is also a concern for employees on reimbursement programs. “Gasoline is a huge concern today,” said Debbie Mize, fleet/relocations manager for Hallmark Cards in Kansas City, Mo. “We have 7,200 part-time drivers who are on a reimbursement cents per mile program and they are very concerned.”
Cost Containment Pressure
Fleet managers are under constant pressure to contain or reduce fleet costs, especially since fleet is typically among the top five expenditures of a corporations, varying in ranking by the nature of the company’s business.
“Controlling all vehicle-related expenses and reducing operating cost has, is, and probably always will be the major challenge, even for a well-run fleet,” said Anselmi of Lorillard Tobacco. One new area of concern is rising interest rates. “With interest rates going up this year, we are looking at different financing methods,” said Grossman.
However, the focus continues to be on lowering cent-per-mile lifecycle costs. “The largest challenge remains to keep the lifecycle costs at the lowest cost per mile possible in order to justify a company car program that will allow safe, reliable vehicles for our employees to perform their jobs,” said Mize of Hallmark Cards. Agreeing is Guido Gavars, CPA, director of procurement, fleet services for Sears Holdings in Hoffman Estates, Ill. “Our greatest challenge is minimizing operating costs per mile, while keeping quality and safety standards high. Every aspect of the acquisition, operation, remarketing/disposal are areas of concern, since they all dramatically impact operating costs,” said Gavars.
But finding cost reductions is not easy. “Since we run a very lean fleet to begin with, it is always a struggle to find those savings,” said Donna E. Bibbo, CAFM, CCTE, indirects sourcing leader fleet, travel, and ASP for GE Healthcare in Piscataway, N.J. “We have managed to find cost reductions in the past several years with integration savings on the acquisition by GE, but now that we are fully integrated, we are looking at other areas like remarketing and upfitting costs as our next targets to try to find savings.”
Another area experiencing upward cost pressures is vehicle maintenance. In 2005, for the first time in almost a decade, fleet maintenance costs increased primarily due to the higher cost of replacement tires, brake components, and labor rates in high-cost-of-living areas of the country. “The overall increase in parts prices, tires and labor rates are more than offsetting any cost-savings we're trying to establish by modifying our preventive maintenance schedule,” said Lynda Dinwiddie, associate vice president, fleet & travel operations for LabCorp in Burlington, N.C.
Concerns About Acquisition Costs
Fleet managers are also keeping a wary eye on acquisition costs. A key factor for increased concern about acquisition cost is the new 2007 diesel emission standards. “The ’07 emission changes to diesels are adding purchasing cost, higher fuel costs, and maintenance expense. My fleet is 95 percent diesel,” said Steven LaPorte, director of fleet management for Iron Mountain in Boston, Mass. The 2007-diesel emission standards have prompted many fleets to pre-buy diesel-powered vehicles in the 2006-model year. In addition, the new emission standard concerns fleet managers because of the new engines will increase acquisition costs and increased maintenance expense.
One fleet that prebought its diesel in 2006 is In and Out Burger. “For heavy-duty vehicles I am pre buying ’06 models and will not purchase any ’07 models,” said Jim Wilcox, fleet manager for In and Out Burger. Another fleet that accelerated its diesel truck buy was NationsRent. “We expect to purchase fewer 2007-model year vehicles because we are accelerating our purchases in 2006 due to the ULSD (ultra low sulfur diesel) engines in the 2007 models. We want to avoid the ‘first model-year’ bugs, and the anticipated price increase,” said Catherine Crewson, director of transportation Services of NationsRent, Inc. in Fort Lauderdale, Fla.
The new diesel emission standard is also a concern for Hughes Supply. “We are very concerned about the 2007 diesel emissions change, and the impact of the alternative fuel. It will have a dramatic impact on the finance of fleet operations,” said Andrew Yarem, director of logistics of Hughes Supply in Orlando, Fla.
Safety Moves to Front Burner
Safety and accident management are becoming greater factors in vehicle selection. Fleets are reporting increased influence by corporate risk management in vehicle selection. For instance, some fleets are basing selector inclusion on NHTSA crash-test ratings. In fact, some fleet managers are hesitant to acquire vehicles not advised by the risk department out of concern that if a safety-related issue should result in an injury or fatality, they might be accused of ignoring the safety recommendation.
“Safety is a huge challenge,” said Barrett of Valspar. “How can we minimize auto crashes? Currently, we have a very extensive program and we still struggle with what else we can do to keep people focused on the road. There are so many issues with other distractions from other drivers (and my own drivers) that it is difficult to control. We are looking at tightening up our cell phone policy, and or, elimination of electronic devices in company vehicles, to keep the focus on driving,” added Barrett.
In Automotive Fleet’s survey of fleet managers, safety was a repeated concern for many of the responding fleet managers, who reported its growing importance in vehicle selection decisions. Some wished to remain anonymous, although they were willing to share their opinions. “We are primarily a sales and executive fleet, and having a formal safety program was not a priority based on our low accident history. However, now we are going at this in a very proactive manner to have a formal training and monitoring of MVR program to support drivers,” said one fleet manager who wished to remain anonymous. “We have fleet, risk, HR, and legal involved in the final formulation of the program. The old school way of dealing with drivers is not the right way, and in today’s litigious climate, just for the risk portion, this is very important. What surprises me is how many other large companies are in the same boat and have the same struggles with this!”
Accident Costs are Increasing
Accident management is a major consideration because of the increased expense to repair vehicles. “Accidents and damage repair costs are a tremendous concern because it doesn't take much for a repair to be over a $1,000,” said Brandon Morris, national fleet manager for 180 Connect in Englewood, Colo.
Another reason for the increased concern is that fleets are experiencing an increased frequency of accidents. “As we have more and more drivers on the road, and those drivers are spending more hours on the road, our accidents are increasing and this is of concern,” said Sue Fensky, fleet manager for St.PaulTravelers in Hartford, Conn.
Driver Dissatisfaction Growing
Driver dissatisfaction is becoming an emerging issue in fleet management. There is a growing demand from drivers and department/division management for greater vehicle selection in the company selector. This is especially true at fleets that have sole sourced for a number of years. Although bottom line considerations will trump driver dissatisfaction, nonetheless, it is becoming a greater issue for fleet managers.
“There is a growing demand for greater car selections on the part of our drivers and division management. We have a number of requests from drivers and management for greater choice in fleet vehicles,” said Henry Paetzel, manager, auto fleet services for General Mills in Minneapolis, Minn. Another expression of this trend has been increased demands for exceptions to selector policy. “Exceptions to policy regarding vehicles are more frequent. More and more people are asking for larger vehicles due to a medical condition or physical stature. It's tough to balance a possible workers’ comp claim with providing the proper tool to do the job,” said Gail Watson, fleet and parking services manager for Nationwide Insurance in Columbus, Ohio.