Fleet Directors See Steady Growth For Commercial Segment

To find out the manufacturers' outlook for 2001 and beyond, and how they will respond to challenges and create opportunities with their products and services in the commercial segment of the fleet industry, Automotive Fleet spoke with Chris Cortez, vice president, fleet operations, for DaimlerChrysler; Tom Gorman, executive director, Ford's North American Fleet, Lease and Remarketing Operations; Dave Hansen, general manager for General Motors Fleet & Commercial Op­erations; Steve Piccinati, director, fleet and remarketing, for Hyundai; Ted Lindsay-Smith, corporate manager, fleet sales, for Nissan; Ross Friedmann, national commercial fleet accounts manager for Subaru of America Inc.; and Marv Rivers, corporate manager - fleet for Toyota Motor Sales USA Inc.

AF: What is the outlook for the commercial segment of the fleet industry for 2001 and beyond.

Cortez: After some weakness in the first part of this year, I don't see a big change coming in commercial business other than the continued move toward consolidation in many industries. The companies buying vehicles have been tightening up cost structures for a few years, which, along with consolidation, has made for a rather flat trend in the large commercial segment size. We are projecting a slower overall automotive industry for 2001 following a few years that have been extraordinarily strong. The 2001 level, while lower than 1999 and 2000, is still by historical stan­dards a very good sales level.

Gorman: We expect the automotive industry in 2001 to be strong (some­where in the mid-16 million vehicle range) but not quite as robust as the past two years. The commercial seg­ment should follow this same trend.

Hansen: Although there have been mixed signals in this first quarter. We're looking for a strong market in the second or third quarter. We're bullish as we've seen the Feds re­duce interest rates, we have a new administration, and GM has new products going to market for 2001. As far as 2001 goes, GM has grown its market share and plans to contin­ue that trend for 2001. In fact, 2000 sales for Fleet & Commercial Oper­ations were the best since 1992. Key enablers for this increase include improved order-to-delivery and cus­tomer support, streamlined process­es/systems, and the implementation of new technology.

Piccinati: Hyundai Motor America anticipates excellent growth for our products in this area for 2001. As vehicle acquisition, maintenance and associated expenses go up, we antic­ipate greater demand for our prod­ucts with their value proposition, fuel economy, and 10-year/ 100,000-mile warranty. Hyundai has new products that aim to expand our reach into this market and we are targeting the local business customer with our most comprehensive deal­er-fleet program.

Lindsay-Smith: We see the com­mercial segment of the industry for the 2001 calendar year similar to the 2000 calendar year performance-wise. We do not anticipate dramatic changes during 2001 calendar year.

Friedmann: Our outlook for the commercial fleet segment of this in­dustry is very good for 2001. We continue to increase our market share in commercial fleet, mainly in the areas of all-wheel drive and mid­size wagons. Subaru presents an al­ternative to SUVs and, in many cases, minivans.

Rivers: Presently, Toyota garners a small share of the commercial mar­ket; however, we are looking at ways to expand our business in the future. Toyota's strategy is to continue to grow in this most important segment by taking advantage of our North American production capacity.

AF: What are your biggest oppor­tunities and challenges for the 2001 calendar year and beyond -both internally and at the com­mercial fleet level?

Cortez: Technology continues to be both our biggest opportunity and our biggest challenge. New Web site functionality this fall is an example of our emphasis on adding value. We provided order status via e-mail and then allowed the customer to dictate if they want to receive it daily, week­ly, or monthly. We thought it better to let the customer "pull" the infor­mation according to what they need.

Gorman: We see opportunities to meet the needs of our customers in three key areas: 1) improve lifecycle costs with better product quality; 2) shorten order-to-delivery times; and 3) fully leverage our remarket­ing capabilities. At the same time, our biggest challenge remains deliv­ering the highest level of overall cus­tomer satisfaction. Consistent with our focus on improving customer satisfaction, our internal priorities are improving customer satisfaction and e-commerce.

Hansen: Overall, the biggest challenge is to continue the launch of our new products while simultaneously improving order-to-order delivery and fleet customer services. If the economy contracts then our budgets and our resources tighten accordingly- that's a challenge, but on the other hand, we could be asked to handle a large share of GM's line in a declining retail market.

Piccinati: The biggest challenge for Hyundai's Fleet Department in 2001 is a "good news/bad news" story. The retail demand for our product is so strong that it is sometimes diffi­cult to secure adequate availability for our valued business customers. Hyundai has just begun to market its Vehicles to the local business market and we anticipate strong demand for our cars - entry level, midsize, full size, sporty, and sport/utility, all with a five-year, unlimited mileage roadside assistance.

Lindsay-Smith: Nissan North America's opportunities and chal­lenges lie with the supply and the large demand of newly launched products such as the four-door Crew Cab Frontier Truck, the Xterra SUV, and the Heel sales relationship of our three-sedan strategy: Maxima, Altima and Sentra.

Friedmann: Some of our biggest opportunities for the years to come are the need for all-wheel drive (AWD) safety and security among commercial fleets. Another opportu­nity may be found in our recent al­liance with General Motors. GM had recently purchased over 20 percent of Subaru's parent company, Fuji Heavy Industries. We are exploring possible commercial fleet synergies between Subaru of America (SOA) and GM, and would hope to capital­ize on our combined resources, which could greatly benefit mutual SOA/GM   commercial   accounts. One major challenge continues to be the need to increase market share.

Rivers: Toyota's greatest challenge in advancing our business in the commercial segment is our lengthy order-to-delivery process. Presently, Toyota is working on a major im­provement in this area, by using a more customer friendly ordering system, designed to dramatically re­duce order-to-delivery of both fleet and retail vehicles. The new TOMS, or Toyota Order Management Sys­tem, is currently under development. Toyota Fleet is also ordering vehi­cles in a "commercial pool" that al­lows commercial customers to take delivery of specific models within 30 to 60 days. In addition, the avail­ability of North American-built product has improved and will allow Toyota to participate in a larger mar­ket segment.

AF: What new programs and ser­vices, if any, will you be providing to your commercial fleet cus­tomers?

Cortez: Our Business Link pro­gram, launched last year as a pro­gram to build dealer skill in commercial business, has grown with year number two. Between Business Link and our Five Star initiative, we are ensuring that com­mercial customers have a knowl­edgeable partner at the dealership. We're also continuing to reduce order-to-delivery times. Having im­proved 40 percent in the last five years, we are developing a new scheduling process that will further improve our delivery times with at­tention toward better schedules when components are constrained.

Gorman: We will continue to work closely with our fleet management company partners to deliver products and services to major fleet customers. For small fleets, we have enhanced our Ford dealership fleet capabilities through our Business Preferred Dealer Network. By the end of the first quar­ter, we'll have a network of 1,500 dealers. Our support of dealers to serve the small, commercial business is designed to give Ford dealers a com­petitive advantage.

Hansen: From an end-user cus­tomer perspective, the expansion of the Goodwrench Fleet Service is a key component that we'll be rolling out this year. Also impor­tant to the end-user is a more struc­tured or a more formalized GM fleet program for our dealers with the appropriate standards and something that will address the rest of the needs of the fleet mar­ket. Outside of what the dealer can do, we'll have a commercial ver­sion of OnStar this year. That will allow the fleet manager to do some things that he or she can't do today on a much more automated basis, such as odometer reporting.

Piccinati: The all-new Hyundai XG300 full-size, luxury sedan and the Santa Fe, four-and six-cylinder, midsize sport/utili­ty are available to the local business customer. They are also covered by our warranty as are our other vehicles. In addition, for 2001 we are targeting, for the first time, the local business customers with competitive incentives exclusive­ly for them.

Lindsay-Smith: Consistency is the key word for Nissan Fleet. We will continue servicing and maintaining our current and new commercial fleet customers with special consideration of the fleet manager point of view.

Friedmann: We have launched a di­rect-draft system for our leasing company partners, and expect to ex­pand this program in 2001. Earlier in 2000, we have also instituted a Web-based vehicle ordering system that has been working out quite well.

Rivers: Toyota is looking at new, innovative ways to market product to the commercial segment in the fu­ture, including Web-based applica­tions, extended product warranties, roadside assistance, just to name a few. We plan to provide commercial programs that are competitive and offer value to commercial buyers.

AF: Are there any changes in your company's fleet incentive pro­grams or allowances?

Cortez: Our incentive programs in­creased this year fairly substantially and are competitive. More important perhaps than incentives, we concen­trate on developing the right pack­ages for commercial use, such as our fleet package on Intrepid that in­cludes ABS, remote keyless entry and power driver's seat. The new minivans have many features that support people who do a lot of busi­ness hours in their vehicles.

Gorman: We've already announced our incentive programs for 2001. We believe they are competitive and provide outstanding value for our customers. Beyond incentives and allowances, however, we deliver a total package, including our prod­ucts and services, to our customers.

Hansen: Last year, which was a first for GM, we published our prices and our programs before our competitors. We also had an early order incentive; I'm not sure we're going to do the same thing this year. I think we've learned last year that we had some success but it also cre­ated some extra work for some of our customers and some of the fleet management companies, because they weren't ready to order their ve­hicles as early as necessary to get the order incentives. We're current­ly developing our plan for 2001.

Piccinati: We have included the all-new, full-size, luxury sedan XG300 and XG300L in our fleet incentives. Hyundai will carry over its 2001-model year dealer fleet incentives on the same 2001-model year vehicles.

Lindsay-Smith: Fleet incentive programs have not been finalized for the 2001-calendar year/2002-model year. However, we do not anticipate major changes.

Friedmann: Our commercial fleet incentive program remains competi­tive. The plan includes a cash incen­tive, combined with keyless entry/security system included at no additional cost. We also continue to subsidize a $200 courtesy delivery fee. SOA has not offered any retail incentives on its current model-year vehicles, but continued to increase its market share.

Rivers: We anticipate there will be changes in our fleet incentives in the future. We review and adjust fleet in­centives annually to ensure Toyota is competitive and offers value to our fleet customers.

AF: Do you foresee shifts in the types of vehicles acquired by your commercial fleet customers and are there any new vehicles pro­posed for the 2002-model year de­signed to meet these needs?

Cortez: A few years ago we saw a fairly significant shift to sport/utility vehicles which followed the retail market's passion for SUVs. I think the market is losing the distinction be­tween traditional segments and the commercial markets are becoming open to all of the new hybrid and crossover offerings, so long as they offer the needed function and space that our customers require. The Caravan and Voyager minivans and the Stratus and Sebring sedans were launched this fall. Next to be introduced is the all-new Jeep Liberty this spring and the new Dodge Ram pickup this summer.

Gorman: Approximately one-third of our commercial volume is cars, with the Taurus representing about 70 percent of the sales. Business is up and we don't expect shifts in our car business. Our two bestselling tracks, F-Series and Econoline, will continue to maintain their strong position in the commercial truck industry. With improved powertrains and improved order-to-delivery, we anticipate growth. Finally, the new Escape and the soon-to-be introduced 2002-MY Explorer will strengthen our position in the SUV segment.

Hansen: If retail vehicle sales slow, history tells us there probably also will be a slight softening on the commercial and fleet side of the business. A fleet that was buying a lot of extended-cab pickup trucks might shift their mix and buy more regular cabs, V-6 instead of V-8 pickup trucks. So we're in the process of getting more regular cab V-6 capacity to meet that demand should the economy continue to soften. We anticipate good sales activity on our Duramax Diesel 6600 engine. With regard to cars, the situation is about the same. There also seems to be a lot of interest in what we call "crossover" vehicles. Buick has a new entry called the Rendezvous that has the versatility of a van but the safety and security of an SUV. We also anticipate fleet interest in the Chevrolet Avalanche, which is a crossover between an SUV and a pickup truck. As far as new products, the 2002 Chevy TrailBlzer, GMC Envoy, and Olds Bravada will be available with our new Vortec 4200, four-valve, inline six-cylinder engine that has the power of a V-8 with the benefit of reduced emissions.

Piccinati: Hyundai anticipates continued strong demand for our carryover vehicles. For 2002 MY we will upgrade several of our current products with two to three all-new vehicles, expanpding our market reach even further.

Lindsay-Smith: We see continued consistency with our model lineup for commercial fleet customers.

Friedmann: The shifts we see in commercial fleet vehicle types are most likely to scaling back of SUVs on corporate selector lists. The costs associated with these vehicles continue to climb; however, the need for an AWD vehicle remains strong.

Rivers: While we don't see measurable shifts in vehicles acquired by commercial fleets at this time, should gas prices escalate and corporate earnings deteriorate in the future, lower priced vehicles offering greater gas mileage and economy could be the order of the day. You may see less sport/utility vehicles in commercial fleets in 2002.

AF: What does the 2002 model year hold in store for fleets regarding alternative-fuel vehicles?

Cortez: DaimlerChrysler's 2002 model year alternative fuel vehicles will again include the dedicated natural gas Dodge Ram Vans and Wagons and the Ethanol E85 Flexible Fuel minivans. Coming at the start of the 2003 model year will be the replacement for the EPIC electric minivan and later in that year, the hybrid electric Durango will be introduced. A new venture for us is our investment in Global Electric Motors (GEM), which produces a Neighborhood Electric Vehicle. These vehicles are certified as low-speed vehicles in more than 30 states. The lineup also includes two- and four-passenger models and short- or long-bed pickups.

Gorman: Our alternative fuel vehicles include gaseous and non-gaseous fuel vehicles. For 2002 model year, we'll continue to offer both bi-fuel and dedicated AFVs. Our bi-fuel products are F-Series bi-fuel propane and natural gas and F-Series Super Duty bi-fuel propane. Dedicated CNG products include F-Series Econoline Van/Wagon, and Crown Victoria. Our electric products include Ranger and TH!NK, which is a new enterprise of Ford. And new for 2002 model year will be the zero emission TH!NK Neighbor, equipped and approved to be driven on city streets with a speed limit of 35 MPH. The TH!NK City will be introduced later in the 2002 calendar year.

Hansen: For the 2002 model year, the Chevrolet Express and GMC Savana will be available with natural gas in both passenger and cargo versions. These vans have 15-passenger carrying capability. Our alternative fuel vehicles will be featured at the 2002 Winter Olympics. Our compressed natural gas vans specifically will be used to transport Olympic athletes and their equipment to and from the games.

Piccinati: Hyundai has developed alternative fuel and LEV vehicles for its home market and for export abroad. We are prepared to meet and exceed all government requirements in this important area.

Lindsay-Smith: Nissan North America is an active participate in the research and development of alternative fuel vehicles. Although limited at this point, we continue to explore new avenues of AFVs.

Friedmann: At this time, our plans for AFVs are unavailable; however, projects at Fuji Heavy Industries in these areas are under way.

Rivers: Depending on state or federal government mandates, there may be more hybrid and/or electric vehicle opportunities for fleet. Toyota has delivered several hundred Prius to date to various fleet customers and local municipalities. We see this trend growing and expect hybrid-type vehicles to be available for fleets in the future.