Automotive Fleet statistics show that today's 'typical' U.S. fleet includes at least 115 light trucks and vans. We know that those vehicles are driven fewer miles each year than are cars, and, that they're held for more than twice as long. But how does the management of light trucks and vans differ in other areas such as selection, specing, maintenance, fuel, and cost-control?
To find out, we put together a roundtable discussion by four light-truck experts at the recent convention held in Boston by the National Association of Fleet Administrators. The four participants in our roundtable more: George Denick, automotive Fleet manager in the corporate services department of Texaco, Inc. in New York; Robert Whitfield. corporate fleet administrator for Brown & Williamson Tobacco Corp. of Louisville, KY; George Weimer, director of transportation sendees for Continental Telecom in Atlanta; and E. Pierce Walsh, director of Fleet management for IG Industries. Inc. in Chicago. We think you'll find their discussion frank and information.
AF: Let's begin by discussing the composition and financing' of your light truck fleets, and how that's changed in recent years.
Whitfield: The size of the fleet at Brown & Williamson Tobacco is about 1,750 vehicles, of which roughly 900 are vans, the balance automobiles. In my vans we're using the Ford F-150 Econoline, the Dodge V-250, and the Dodge mini-van. Our vans are all converted with special interiors. We buy them on T-bars, with no seats in them, and then Midway Truck and (loach puts in the seats, the paneling, the floor coverings, the shelving, and the anti-theft systems. The vehicles are all owned by Brown & Williamson; we don't lease any of them.
Five years ago we were a 100 percent car fleet, but because of the simultaneous downsizing of cars and the upsizing of our requirements - where we went from one promotion to two or three, and started carrying more product - we began putting people into the vans.
Now we have a personal use problem. But our drivers have to make a basic decision: do they want a car they can take on vacation for two weeks out of the year but struggle with for 50 weeks? Or do they want a vehicle that will do their job for 50 weeks, and, if necessary, maybe rent a car for the two-week vacation? We started out with volunteers for vans the first two or three years. But now our sales force knows they will be 'hired in' with a van. They may end up with a car, but they'll have a van to start with. If they don't like it, they may have to go elsewhere.
Denick: Texaco's fleet consists of 8,400 vehicles throughout the U.S. Thirty-two hundred of these are light-duty trucks - pickups ranging anywhere from Ranger/S-10s, to dual-rear-wheel-drive F-350s. Beyond some 3,800 automobiles, the balance of the fleet consists of our delivery fleet. One part involves transporting refined and packaged products to our various service stations and customers. The other part is an operation that hauls crude oil out of the various mountain states down through the South. Then there are 350 aviation refuelers that are subleased to our aviation fuel customers.
In terms of selection and specing, we don't tell the guys on the firing line what they have to have; but we do guide them strongly. Take our oil field operations. Today's cars are becoming so small that you can't use them in an off-highway situation, if you're carrying a lot of materials. So we've decided to go to trucks - regular cab or super cab- for the foremen who are carrying equipment. We give them the same equipment in their trucks, that they'd have in an automobile. That's more expensive, but the bottom line is that they have to get the job done.
The Texaco fleet is primarily leased, and the direction continues to be toward leasing. Had we not merged with Getty Oil, we would have been 95 percent leased. But our merger with Getty put that number back to the 60 percent level. We will gradually convert the Getty fleet from ownership to leasing.
From our standpoint, leasing really boils down to what is the cost of funds? If we can drill oil wells and make a return of 'X', say, and then finance vehicles for 10 percent pretax, five percent after tax, we are better off to put our money in oil wells rather than in purchasing vehicles.
Weimer: We run into the same thing at Continental Telephone. I think all companies need to be looking at that 'lease versus buy' thing on a pretty regular basis. Because the company's requirements change.
Whitfield: We have proposals out right now to look at leasing. And we will be making some decisions, because the cost of money and the value of money is continually changing.
Walsh: That's very true. IC Industries is a holding company with seven major operating divisions, and we lease everything because we are a very cash-flow oriented company. Even so, we do the "buy versus lease" analysis constantly.
We are a fairly large conglomerate, running the gamut from consumer products all the way through heavy manufacturing. We have a very diversified type of fleet - about 3,000 passenger cars and close to 1,500 light trucks and vans. The remainder of the fleet, approximately 9,000 vehicles, consists of medium-duty trucks, tractors and trailers, and the like.
We have a selector list that we put together about three years ago, and we are refining it every year. Hut it only applies to the passenger cars. For light trucks, vans, tractors and trailers, I naturally have to rely on the guys who move the product and service the product. We also use Midway Truck and Coach for conversions. When we get down to our railroad division - where the trucks are very tough, very sterile - we put air conditioning in them. But aside from that the drivers don't have much choice. Our light-truck group primarily runs from the half-ton to the one-ton configuration. We lease all our cars, vans, and light trucks from one national firm.
Weimer: Continental Telephone is primarily a rural telephone company, and we are in such wonderful towns as Rosebud, TX, and Johnstown, NY. We are really an amalgamation of over (500 small telephone companies we acquired in the early sixties As a result, our fleet operation tends to be a little more difficult than it would be if we operated entirely in metropolitan areas.
We operate about 8,000 units at the present time, 25 percent cars and 75 percent trucks, about. 5.500 trucks. We have some 500 specialized trucks such as bucket trucks or digger derricks; the rest are light trucks.
We tend to spec the vehicles the way that we want them to be used. And our load requirement has been diminishing over the last few years because the telephone companies are no longer carrying phones in their trucks. And that's made my job a heck of a lot easier.
Of the 5,000 little trucks, probably 4,000 of them had been full-size vans -the conventional telephone truck you see all over the world. Then, starting in '80 or '81, we got into the mini-pickups and started putting toppers on them and some shelving inside. That took three or four years to accomplish, and it was done primarily to reduce our fuel consumption. We were able to get our average light-truck MBG from 10 miles per gallon to a little better than 20. If you're driving 100 million miles a year, the impact of that is pretty substantial. We have primarily equipped those little trucks with standard transmissions, the majority with six-cylinder engines because we tend to load the trucks up pretty well. I've always felt you're a little better off to have some insurance on those engines.
This year, we've started trying some of the minivans because we were, in effect, taking a mini-pickup truck and making our own van by putting a top on it. We've ordered maybe 400 of the minivans, primarily Astros. That's because at the moment, Chevy is the only one with the barn-door type rear door, the only one we can use because of our overhanging ladder racks. Despite my hollering at the folks in Detroit - for several years, I was involved with advisory groups for both Ford and Chevy - Chevrolet was the only one that listened to the barn-door idea. I think we're going to give up a little MPG with the minivan because it's a bigger vehicle, but the initial reaction from the drivers is incredible - they love them.
We also operate a number of full-size vans, probably 200 FWD units which are horribly expensive. And we do get into some conventional pickups and some cab and chassis. We have been primarily a mini-truck fleet, though. I believe we'll see more use of the minivan, not the mini-pickup. We'll continue to use the pickups for supervisors and others who don't really have a carrying requirement.
Probably the majority of our vehicles are leased. But the leasing company is really just a financing arm for us: we buy the vehicles, and then sell them used. We don't rely on the leasing company for acquisition. That's because we have more of an interest in getting that unit delivered -- and later disposed of - than the leasing firm.
Walsh: We have about 700 small pickups like those you mentioned, and we converted all of them to automatic transmission.
Denick: We did the same thing.
Weimer: You're all automatic?
Walsh: Yep. With our railroad guys operating in rough terrain, we found they tore the devil out of the standard transmissions. That's why we went to automatic and the six-cylinder.
Weimer: Well, I'm not sure we're right in believing that standard transmission is the most cost-effective way. I think we'll be able to tell in about 12 months.
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Denick: In studies conducted in '80, which led to our decision to change the power train from a V-8 manual to a six automatic, we found that they were tearing up clutches, and that the shift-column mechanisms were getting to the very expensive after about 45,000-55,000 miles. The maintenance on the manuals far outweighed the initial cost of the automatic, and they just worked better.
Whitfield: The up and coming employees never drove a stick shift, in many cases.
Weimer: You're absolutely right. But 1 view the vehicle as a business tool. And if 1 am going to furnish someone with a pair of pliers, I'm going to tell him what kind of pliers to use.
Walsh: Well, you're also going to have to train him how to use them.
Weimer: We've had some problems with that over the years, no question. We've had complaints from people who didn't know how to drive a standard transmission. Maybe I'm a little old fashioned, but I told them they'd damn well better learn!
I'm still not sure we're right in the long run. In another year 1 will have some very specific information as it relates to transmission operating costs, and then I might be able to say, 'You know, we're being silly. We should have everything in automatic.' But, the cost, of automatic is no longer $350. Now you're looking at $600. One advantage of manual is in production time, because those guys in Detroit are struggling with their CAFE requirements. They love those manuals because it really helps them.
Denick: Do you have in-house garaging?
Weimer: No. Except for one division with its own garage, everything is subcontracted out - we don't do any of our own repairs and maintenance.
Walsh: That's an interesting point. We have a lot of in-house maintenance.
Weimer: Do you think in-house maintenance is cheaper.
Walsh: Well, the jury's still out on that. I'm not quite as far along as some in terms of cost control, but we're looking at it very carefully right now. We have one division that I think does an outstanding job on maintenance and cost control. But we're probably two years from knowing exactly what in-house maintenance is costing us.
Weimer: Our problem is that we really don't have large concentrations of vehicles. With little bits and pieces scattered all over a state, there's just no economic way to pull them all together. So we're almost forced to work with the dealers and the independent service facilities. But I still believe it's more economical to let someone else do your maintenance. They're more professional.
Denick: They have an incentive to do it, because they have their own business and must run it economically.
Walsh: I'm always asking, what's it costing us to do maintenance in-house? You have to find that out upfront, and it's amazing that the in- house guys are somewhat reluctant to tell you what it's costing you.
Weimer: Well, they have their own set of figures. "Which ones do you want today?" (Laughter)
If he's a good businessman, that outside guy knows what it's costing him and what he's going to charge you. The one advantage to in-house is doing your own pre-servicing on the new vehicle, because then that gets done right. A lot of dealers, on the other hand, just don't flat. care. You're lucky if you get the vehicle washed!
Whitfield: Another advantage of in-house is the time element. With your own mechanics you can control the priorities of getting the work done.
AF: What are the biggest problems you've been facing with your trucks?
One of the Big Three is my most consistently reliable supplier, and I think that's because its representative there in Chicago is probably a little more aggressive, a little more attuned to what we want. Maybe it's because he buys more lunches, 1 don't know...
Whitfield: I think that's an important point: the closer you are to your factory representative, the fewer problems you are going to have. The factory rep is your lifeline! This is the man who can get you what you need when you need it. If you've got a crisis, he's the guy who will try to keep things running on a regular basis. He's your best resource.
Walsh: When I have a product problem, I don't go through my leasing company - I call somebody I know with the manufacturer, and I know a lot of them. I work at having a good rapport with them. These leasing guys think they know these guys; well, I guarantee you I know them better than they do, or at least as well, and I don't have to go through a computer. I make a phone call and get an answer.
Weimer: Do you find that with a little more planning, your deliveries aren't quite so much a problem?
Walsh: Definitely.
Weimer: I'm forever harping at my people to get those orders in early. If we're going to buy a medium-duty truck, it's going to take four or five months to get the thing built. If you want it in the spring, don't order it in February - order it in October so that it will be there.
Whitfield: I give the factory reps an estimate of my requirements at the beginning of each buying period so they can get the allocations in and get the deliveries pre-set. That reduces a lot of the delays.
Denick: With the size of the fleets we operate, you have to have a lot of long-term planning in order to go through scheduling and production, and not find yourself caught up in the middle of a model changeover. If you don't do that kind of long- term planning, shame upon you.
Weimer: It's so true that some fleet managers do not develop good factory-fleet contacts, because they think it's not that important. In fact, it's very important. Those people are the key.
AF: The key. Very important. Absolutely essential.
Weimer: The only problem I see developing is that the factories are now reducing the number of those guys. Suddenly you have a guy who's responsible for 15 states, and there's no way in the world he can get to all of his contacts. Therefore, it becomes even more important, that you develop a good relationship with that guy.
Walsh: One of the complaints I've had with Detroit for a long time is that they don't give us enough information in advance. They should tell us if it's going to lake three or four months to get vans. Then we could schedule around that. But if you tell us it's going to be normal delivery of eight to 10 weeks - and then it turns out to be four months -we are really in a mess. We keep yelling at those guys about this, but we still never really know.
Whitfield: Lots of times they don't know themselves. But accurate information - as things change - is very important. We don't want to find out two months later that there is a shortage of six cylinders, because then it's too late. We've got to know as it happens.
AF: Operating costs are also very important. What: strategies have you put in place to control your costs for trucks and vans?
Whitfield: This year our internal computers are generating reports on the actual cost of the fuel we're purchasing. In each division, we are-showing the cost per gallon for each month. In some cases it's ranging from $1.29 up to $1.72. (That last figure is for premium full service, with a wash thrown in.) We are sending this data, in turn, to our operating managers. And we will review it six months down the road to see what reductions have been accomplished.
Weimer: Do you have any idea what percentage of your fuel purchases are full serve?
Whitfield: Right now it's running about 40 percent (full serve), and that is excessive. It's either premium when it should not be, or else it's full serve when it should not be. That's why we're giving the field manager the tool to reduce his bud get. The way he will reduce his budget is to tell his people to start pumping their own gas. We're not ordering him to do that; we're giving him the tool to do it himself. That's the only effective way.
Weimer: When I got into this area about, a year ago, I showed each of our managers their average fuel cost. And one of them really got excited with his people and said, 'If I see a gas ticket come in with more than so much per gallon on it, you have a problem.' Well, that stuff stopped immediately.
Walsh: The thing that concerns me with the elimination of full serve is that with self serve the routine checks of tire pressure, oil levels, etc., just don't get done. And some of our leasing people have fold us that we're now experiencing a higher degree of engine failure than we have in the past. I don't know if there's a connection or not.
In our efforts to find out exactly what we're spending for fuel, we've gone to a fuel program. It's a full- service credit card type of program, which is a more expensive way to buy fuel, but we decided to go that way just to get a handle on our expense. To make sure we're putting gas in our own vehicles -- and not in our brother's. My goodness, we've found out some amazing things. You'd be surprised how many cartons of cigarettes and pairs of sunglasses are bought on a fuel card.
Whitfield: For some of our fleets that don't have good cost management, we recommend that they get into a leasing -company arrangement for a year or two before going in-house. That way you can work with a gas-card type program, say, to determine exactly what your costs really are. Then you can figure the best way to control costs on your own.
AF: Beyond fuel, are there any other cost-cutting measures in place?
Denick: We have done two things based on a study we conducted a few years ago. The first was to go from V-8 manual engines to six-cylinder automatics. The second was to standardize our fleet specifications for the light-duty trucks.
We have a series of 10 different specs per manufacturer for the vehicles that, we will use. The top part of each 'pre-spec' sheet lists the standard equipment on each vehicle. The bottom part has some options that our managers can adjust to their local requirements. Such as: V-8 engines in the mountains, as opposed to six-cylinders, Air conditioning - that's a big deal with us. Some folks have if, some don't - it's up to the manager. Others have mud and snow tires, depending on the terrain they cover.
When the fleet covers the entire U.S., you have to take terrain into consideration. You have to be very flexible. We let the local people spec the trucks, but we have them spec.
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