On April 2, Wheels Inc. and ALD Automotive signed an agreement to create a global partnership to serve the strategic needs of multinational corporations whose global fleets require specialized management and attention. ALD Automotive, a subsidiary of Société Générale Bank, headquartered in Paris, is one of the largest fleet management and leasing providers in Europe. Present in 39 countries, ALD International has an international portfolio of nearly 800,000 vehicles. Wheels manages approximately 305,000 vehicles. More than 40 percent of the partnership's combined customers have already initiated an international approach to fleet.
Automotive Fleet recently discussed the new global partnership with Jim Frank, president and CEO of Wheels, and Pascal Serres, deputy CEO of ALD Automotive. The following are excerpts from the interview.
AF: Has equity been exchanged as a result of this global partnership?
FRANK: There is no equity exchange. Each company will continue to be independent. It is a contractual agreement between Wheels and ALD. The partnership focuses solely on global fleet management. Both companies remain financially independent and maintain their existing operations. We have contractual arrangements and commitments on both parties in terms of providing mutual financial support for our common enterprise. We are committing quite a bit of resources to building this relationship and common branding. In North America, we will be known as Wheels in global partnership with ALD Automotive. In Europe, it will be ALD Automotive in global partnership with Wheels.
SERRES: I would like to add to what Jim was saying. Many of our customers and Wheels customers are the same. It is extremely important that both Wheels and ALD were chosen by similar customers. Another important point for us is the sharing of the brand because we both need to promote the other company. We are in the service business. The customer stays with the company that offers the best service. We consider Wheels to be, by far, the best solution in the U.S. and are very pleased that Wheels has exactly the same objectives as ALD Automotive.
AF: How does the partnership between Wheels and ALD Automotive affect ALD's business subsidiary in the U.S.?
SERRES: We have a subsidiary in the U.S. that does not have the capacity to serve international customers. We made this alliance to better serve our international customers.
[PAGEBREAK]AF: What was the timeline in negotiating this agreement?
FRANK: It started toward the end of last year, although we've known each other for the past several years.
We are very excited about this agreement. We have both learned from each other, and we think that some creative new products are going to result in both Europe and North America as a consequence of a catalytic effect of discussing our different products and approaches to the marketplace.
AF: What are some examples of these creative new products and services?
FRANK: The first thing is the development of a common database and common reporting. We have spent a number of months developing a product that is very exciting. We've shown it to some of our clients, who share this excitement. It provides insight into their global fleets and consolidates data from around the world into a very thoughtful and intelligible form. The primary task will be establishing common data.
The second key piece will be having a single point of contact. We will have a global account manager available to our fleet customers who participate in these programs. Clients will essentially go to one point of contact for guidance and insights about optimizing their fleets.
From a product standpoint, there are two areas where we see new ideas originating. ALD is quite interested in seeing how the risk model works in the United States, which Pascal can elaborate on. Wheels is very interested about the services ALD provides in Europe, which we don't. Additionally, the selector in Europe, for a number of good reasons, is substantially more diverse than the selectors used in North America. Given the changes with the U.S. domestic manufacturers, the pressure for a reduced carbon footprint, and the probability of substantial increases in the price of fuel, a more customized and diverse selector in the U.S. is something that would be well received.
SERRES: There are two areas in which we need to be innovative in Europe. The first is related to being a "green" or "blue" fleet. The common database will be very useful for blue fleet initiatives, which are extremely important in Europe. To reduce carbon emissions, you first need to know how much your fleet is emitting. The taxes associated with emissions are very expensive, and we can help reduce a lot of the fleet cost for the customer.
The second area is related to the risk model. In Europe, the lessor takes the risk on residual values when we sell the car and most of the risk on maintenance. We either make a profit or loss. Competition has almost eliminated the premiums, and all lessors are suffering. The consequence is the cost of the leasing in Europe has increased. In the future, I believe we need to be able to offer an alternative to our customers. Maybe the alternative is to work on a new product based on the American leasing product, in which there is no risk for the customer. The customer is just buying a service and paying a fee.
[PAGEBREAK]AF: When will these new products be released?
FRANK: The global reporting and global account management will be introduced this year. The broader products won't be developed until the end of this year or next.
SERRES: ALD has already created a common database for its own territories. The 39 countries in which we do business already operate on one database. Developing another database with Wheels is much easier because we just have to integrate two databases.
AF: Are there concluding comments that you would like to make regarding this partnership?
FRANK: We are committed to making this partnership work. We will be held accountable for doing so in terms of bringing value to the clients. I think it will be a game changer. One of the questions people ask, which I think is an appropriate one, is in a challenging economy, why would we commit these resources and energy into a new program, when everybody else is hunkering down? Our response is that clients are more motivated to do global transactions because of the pressures they are under to show better results and to deal with increasing costs. In the past, we've had clients interested in global fleet management, but couldn't get authorization. Today, clients have much more authority to get things done because everybody is under pressure to produce results. This is the right time to launch an aggressive initiative such as this. We think it is a time when clients can actually do something and accomplish things they might not have been able to do in the past. We expect to see real results beyond what has previously occurred.