With the beginning of a new model year many of us have a built-in reason to re-evaluate our routine and everyday decision-making activities. Like with New Year's resolutions, we have a clear cut responsibility to focus attention on the cost of doing business.

Even with the strong pressures that corporate man­agement exerts, many of us arc inclined to simply coin-pare our charts and totals with last year or a similar period of time . . . and then justify, whatever the cur­rent position, by identifying the ever present influences of high wage costs, inflation generally, a run on the used ear market, and the higher original prices of the new cars. Surely, these are affecting factors. But in my conversation with businessmen and in studies of cost analysis, I must admit that a couple of points stand out.

One is that we are now becoming so automated that virtually every large fleet and leasing company has volumes of perforated cost sheets shooting out from some kind of mechanical monster. Too often, the other­wise astute fleet manager privately informs me that he does not fully utilize the tabulated results compiled by the machines. Often he does not understand the re­sults. Or his management may have requested the reg­ular analysis materials but never a comprehensive re­port on them. The substantial cost of generating, post­ing, programming and executing such cost data is obviously expensive. Yet so many fleet men continue to ignore or wholly depreciate the value of this infor­mation which can be of immeasurable aid in improving operations.

Likewise, the leading companies that have fallen into financial trouble have, been, upon analysis, those which have failed to keep alert to bottom line influ­ences. Our biennial leasing survey indicates that the one largest complaint established (and presumably financially successful) leasing companies have is that the new entries do not know costs and, therefore, are offering rates that have little relation toward a true expected profit.

It may be two years later that management wakes up; or they may panic in the meantime quoting even lower rates assuming that greater volume will help spread the overhead factor and their "nut" will be made.

How tragic this attitude has been for a number of leasing companies. There is the obvious personal loss to the leasing company . . . their clients then have a relationship disrupted and with proper phasing out of the vehicles, a new change cannot be made orderly overnight. Then there is the additional shadow on the entire industry that corporate management absorbs and a reflection of distrust exists even on the "good guys."

How many lessees are found changing lessors each two year period simply over insurance cost factors? Obviously, once a lessor has established an experience factor on accident ratios he should be in a better posi­tion to judge costs for the next two years. Yet, so often, the eager new leasing company comes in and assumes that they can "beat the record" and offer a more eco­nomical package. And that is how profits are lost . . . every day!

My plea is for sound business judgment based on good cost data that is available. The ethics of our busi­ness will benefit and will serve to augment the indi­vidual prosperity within the business.

Now . . . for my New Year's resolution. . .

 

 

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