During the recent NAFA conference, Automotive Fleet conducted a round-table discussion, focusing on how a selector list is developed. The discussion provides readers with points of comparison and contrast concerning this ever important fleet manager's task.
AF: In this hour we will focus on two main ideas: The first one is the structure of a selector list. Under structure we will talk about recent patterns in choosing the makes, the models, and specific spec'ed equipment, while also considering driver categories, driver involvement, and driver choice. The second main area we will talk about is the actual selection process - the process by which a fleet manager actually creates a list. We will pin down where the responsibility lies, where one gets input, when decisions are made, what tips would you advise, and what pitfalls you would caution others to avoid.
We have a number of experts with us today:
Mary Lou Dougherty is fleet manager for Ashland Oil, one of the largest independent oil companies in the U.S., a diversified company with approximately 3,500 cars and small pickups. Company vehicles are on lease from PHH and Gelco.
Dennis LaLiberty comes from Wheels, Inc., a large, nationally operating auto and truck leasing firm, with approximately 80,000 units in service, 55,000 autos and 25,000 trucks. Wheels' function, in this respect, is as counselor to its 600 accounts on such matters as vehicle selection, replacement timing, etc.
Vic Hasler works for Eli Lilly and Co., based in Indianapolis and primarily a pharmaceutical drug manufacturer but recently expanding into other fields. All 1,425 vehicles are leased from Wheels.
Aram Papazian is responsible for fleet and for risk management at Block Drug Co., a New Jersey dental care manufacturer. All 350 passenger cars are leased from Avis; common carriers are used for trucking.
Al Cavalli represents Avis Car Leasing, which specializes primarily in passenger car leasing, handling- few trucks and practically no large trucks. Avis offers all types of leasing -closed-end, open-end, individual- and has approximately 37,000 units under lease, with approximately 600 fleet customers.
Let's start with a general description of the selection process. Vic, would you give us an overview?
Hasler: Each year, determining what you're going to have on your selector list is an on-going process. An important part of that process is soliciting information from field people - both management and the actual representatives. I try to attend at least two business sales meetings a year, and I try to get direct feedback about how they view the company car. Additionally, I ask drivers to "blue sky" about what they'd like to have. Of course, that's opening yourself up, but I think it's necessary field input. Another aspect is the correspondence, phone calls, and day-to-day contact with the field; you pick up on a lot. We additionally bring experienced sales reps into the home office for training sessions; I try to participate in those, either on a formal or informal basis to get information.
That is what we term field input. Input from department management is also crucial when determining the various aspects that might be changing in how they are marketing our products, what their needs might be, and the marketing tools they might be using, the sales aides they plan on providing. We then relate that information to things such as trunk capacity, the need for sampling or literature carrying capability. Recently, there has been interest in cassette players because we've been providing training tapes. All this information comes from our home office marketing.
We also work with the manufacturers' sales reps on an ongoing basis, gaining information from them about what is available and relating to them what we feel our needs are going to be. They make suggestions as to what they think we should be looking at. I also get information on an annual basis direct from the manufacturers through the leasing companies, providing their best judgment as to what a selector list might consist of. We get information from trade publications such as Automotive Fleet and from NAFA meetings and seminars, which can be especially helpful.
We then try to get a match of what we feel our needs are and what our corporate objectives are. We go through a rather exhaustive review of where we have been positioned in the last couple of years so that we can then come up with a list of objectives we would like to achieve with our program. The task then is to weigh those objectives in the proper proportion to satisfy the needs out in the field. So we are looking at the function of the car, operating costs, total holding costs, acquisition, potential resale, net depreciation. I put all those things together and develop a shopping list of objectives.
Our final step is to put that with what's available from the manufacturers, and I translate that shopping list of objectives into characteristics of cars. From that I develop a list of cars. That list is screened by our executive committee, who gives it their final blessing or suggests changes.
AF: Mary Lou, how different is your process at Ashland Oil?
Dougherty: I think we all do pretty much the same thing. I attend a number of seminars each year put on by the leasing companies and by the motor companies. I also get some input from lessors on what we are going to recommend. We try to go along with a lot of their recommendations, but sometimes we can't. They were trying to steer us into smaller cars last year. We had already downsized once, and if we did it again, our drivers would tear up the town.
AF: How do you evaluate your current holdings?
Dougherty: Recently, for example, we had a lot of problems with a certain make of car. I check downtime on all cars, particularly those that have been out of service for a month. We also go on fuel economy. I gather facts and decide whether we want to put that car in the fleet again if it is causing us too many problems.
Papazian: Our selection process at Block Drug is not as comprehensive. We break down into three sales divisions, and at one time, about five to six years ago, those sales divisions were on their own. There was no centralized fleet management program per se. It was only after it was brought under one head that the fleets were given a selector list. Up until two years ago, we did not have a selector list. We selected a car, and that car was the car for the fleet. But we noticed that two things could happen: We could either have a terrifically good car for resale or, if we happened to pick a car that suddenly bombed out, we had 350 cars that were all bombs. So it was then that we started to get a selector list. What we did originally was try to stay within the same size and price range. Then came downsizing. This year, we've upped it to a choice of three vehicles, and I'm sure each year as we go along, we'll increase it.
AF: What are Block Drug's criteria?
Papazian: One is safety, keeping the car at a reasonable size. We're not too concerned about trunk space in that our salesmen are not carrying the amount of material that necessitates a very large trunk. We do have a distinction between salesmen and division managers, and we upgrade them by one car or one model; they'll get a Marquis Brougham, a Ciera Brougham or a Pontiac LS. Again, we tried to open up the selector list; we keep our basic standard equipment, with both safety and resale in mind.
AF: Let's turn to our lessors for a moment now. Let me ask a broad question: In terms of vehicles on a selector list, what patterns have you noticed in the past two to three years?
LaLiberty: There has been some stabilization of car selection. If you go back three or four years, there was a pronounced trend toward downsizing. It follows the manufacturers' production mix, by and large. In the last two years, I think you've seen somewhat of a stabilization and pretty much a bottoming out of the trend toward smaller size cars.
Cavalli: I tend to agree; in fact, you'll notice that percentages in the upper levels have increased significantly in our fleet. I think if I recall correctly, the large cars amounted to 18 to 20 percent, where last year they were down in the single digits, so there has been a swing back to large cars. I'm not yet prepared to say rightly or wrongly so, but I think it's delaying the inevitable. The large car is an extinct animal. It's on its way out, whereas smaller cars are here to stay. That's where the fleet business is going to be.
AF: Other responses on what Al brought up, the question of size?
Hasler: We've downsized. I don't see us further downsizing in the future. In fact, in retrospect I consider our cars really big now. Our move to four cylinders was accepted very well because about a third of our vehicles are sold to drivers at the end of their terms, and they want a size car that they like.
Papazian: Downsizing has just about bottomed out. My management has indicated to me that they want to stay in the particular size car we have right now; they want to stay in a 6-cylinder engine; they don't want to go down to a 4-cylinder. Of course, that can change drastically in the future depending on what the manufactured are putting out. I have not had any complaints from the field about the downsizing we've done thus far, going from a Chevrolet Impala to a Cutlass Ciera. What we have done to avoid driver dissatisfaction over downsizing is upgrade the car based on the way the average person thinks. The average person may think that a Pontiac is a better car than a Chevrolet - it may be the exact same car but with a different nameplate, which they think has greater value. So you can tell your drivers, yes, I downsized your car, but I upgraded the nameplate. We haven't added any additional standard spec'ed equipment; the last thing we added on was a rear-window defogger.
AF: What other options have you pushed for, and which have moved toward becoming standard fleet-car equipment?
Papazian: Before you can answer- that, you have to consider matching the option content to the particular grade car you're buying. That is extremely important, or else you have a bomb in terms of the used car market. But the one single most popular thing has been the AM/FM stereo, which has become near standard. The other is cruise control.
AF: Have lessors noticed the same trend?
LaLiberty: I would concur with Aram. The stereo radio and cruise control are most common accessories that were uncommon five or six years ago. Fleet cars have been equipped since the early sixties with basic creature features: air conditioning, power steering, power brakes, and automatic transmission. But within the last five years, stereo radios, cruise controls-and to a certain extent, tilt wheels, power door locks, and power seats and windows - have become common.
From the standpoint of resale, something that really enhances value, while being something that you may not be able to justify purely on an economic basis, is anything that the dealers can't conveniently put on themselves. A vinyl roof is not a big factor at resale time, because if a dealer chooses, he can put on a vinyl roof efficiently and economically. On the other hand, with a larger size car, a dealer can't put on power seats and locks.
Another thing complicating the issue is the offering of incentives. The fleet manager frequently has a dilemma in that, if he wants to put one make and model car into a selector and that model comes with certain features, then he is obliged to offer those same features in the other makes that line up against that. And if they don't, are they then subtly inducing the ordering of that car that offers the incentive?
AF: Let's delve a little deeper into the process of developing your list. Would you take your process from day one, going beyond the basics?
Papazian: The first thing I did for '85 was go back and look at what I ordered for and am using in '84. Because of my connection with risk management, I know what accidents are costing us, and I can look at trends and see which cars are involved in the accidents. Secondly, I need to find out how long a manufacturer is keeping a certain model. I contact the fleet reps, sometimes four or five times a week, trying to find out what's going on, what's down the line. For example, the Omega may be out as of '85 or may stay on until '86. I don't want to have that ear in my fleet three years hence, after the last year. I don't know what will happen with it, how the resale is going to go, but I don't want to be the guinea pig.
Dougherty: As a fleet manager, you don't necessarily want to be the leader, but then you don't want to be at the end of the line. The risks, come resale time, are too great.
Papazian: I try to look ahead and see what is going to come down the line, and I do take into account any complaints I've had from my drivers. Then I go into the pricing structure of the cars we have, determining what it is costing me for each car. I present this to management and say, this is where I think we ought to be positioned.
AF: Let's try to define your contact manufacturers? How important are the fleet contacts? What previews do you attend? Do you drive the cars?
Dougherty: I try to go to the Ford, General Motors, and Chrysler showings, and they usually get us a car to drive for about two weeks.
Papazian: I do the same thing: I try to go to every show there is. And I will make every effort to get every car and drive it, even if for only a couple of days. I put it through the mill. I don't recommend that anybody buy the car after I've finished with it because I do push it. I want to know what it will do to get out onto a highway. If I drive a car and am comfortable in it, both in terms of driving and creature comfort, then I feel our salesmen can be comfortable in it.
LaLiberty: As a lessor, attending product shows is too late. You're dependent on the manufacturers' pre-product information. And as far as I'm concerned, it's a mixed bag in terms of what type of assistance you get from the various manufacturers. Some of them are very good; some are not very good at all. And that is the function of the person assigned to that job.
AF: What do you specifically want from a factory fleet rep?
Hasler: I want the best information he has as to what's coming down the pike. I want to be on the front edge of what they think is going to happen, especially if it's going to force me into a different model car. I also expect them to be aware of what we've got in our selector list. I expect them to contact me from time to time; I don't want them to camp on my doorstep, but I want them to keep me in mind, schedule me for a regular visit or a call.
AF: Does the service you get affect you selector list?
Hasler: There is a certain bias introduced by me and my office personnel when individuals are making their selections from our list based on what my analysis is of what kind of assistance we're get ting. I'll say when we're getting good response from a manufacturer and when we're not.
AF: Al, what is the relationship between Avis and Detroit?
Cavalli: Each year the manufacturers invite us to Detroit early in February, so we do glean information early on, in addition to filling the blank spots for our customers as needed.
If I might diverge, in the generic identification of car size, we've gotten into a rut in the industry by quoting an intermediate, a compact, or a subcompact. Too often, unless you look a little deeper, you can get into trouble. As an example, back in '78 the average automobile was an intermediate-type automobile, identified as such. A profile of that car was something like 3,230 pounds, 233 CID engine, and showed a ratio of 14 to one of weight to displacement. With the '83 counterpart, now termed either a compact or a mid-size, you're talking about an average 2,815-pound car, 150 CID engine, and a weight to displacement ratio of 18 to one. So even empty, that particular car is lugging around four pounds more per inch of displacement than its predecessor.
Here is where a lot of the dissatisfaction with the so-called small car came. They selected them basically on the generic term, rather than getting down into the basics and seeing what that car really represents. What I'm getting at is a knowledge of the product, knowing what is available, what can be had, and tying that into specific fleet needs, what job does it has to perform.
AF: What type of relationship do you have with your senior management concerning your selector list?
Dougherty: After we make our selection, it goes first to our financial people, who take a look at it. If they think it is a good buy, it then goes to senior management.
Papazian: I work for a small company, and I happen to report to the treasurer, who is also a member of the executive committee. If he gives his approval on it, the chances of it being totally disapproved by the executive committee are slim. Basically, that's all that happens; he does give me guidelines in terms of price number of cylinders, and size, but that is based on the information I give him on what's available in the market. He came out one time thinking about diesels. I fought it tooth and nail, and they didn't go in to the fleet. We're satisfied because even if it had been five cars, we couldn't give them away today.
AF: If we could break the selection process down to input from different people - management, lessors, factory, drivers- how would you divide up the percentages?
Hasler: I look to the field for a fairly high percentage, say 50 percent; from the manufacturers, maybe 10; from my financial people, maybe 30; and the balance from other contacts.
AF: As a lessor, what do you want the fleet manager to bring to you? Dennis, say I had just taken over the fleet of XYZ Company, which we lease from you, what would you want from me?
LaLiberty: Primarily you need to look for a usage profile - what kind of miles are they driven, what types of territory are they driven in, how often do you plan to replace them, how many stops a day do you make, how much trunk space do you need, how many times are you putting more than one person in the car, how many people frequently travel in the car, what sort of product lines do you have, what type of business are you in. If you as a lessee can answer those questions, then I as a counselor can make recommendations.
AF: Do you, as lessors, find yourself making decisions that a fleet manager might make himself?
LaLiberty: We don't ultimately make decisions. Our input has greater or lesser weight depending on the nature of the company and of the individual. An experienced and well-informed fleet manager will use you as one of the sounding boards upon which he or she will develop his or her own selector.
Cavalli: I would only add one basic thing, and that is that I try to find out from the lessee what his management's viewpoint is in terms of a company car fleet. What percentage is he interested in image, in prestige, in economy? You need to establish some kind of profile.
So far as providing information, that basically is the lessor's function- to define what is available and what that can do, and to give the fleet managers that information so that they, in turn, can make their own decisions, because they're perfectly capable of doing it.
Management can guide the fleet manager in terms of perception, image, dollar amount, who has a car, whatever, but as far as the selection process, it should be totally in the province of the fleet manager.
AF: What other important aspects of the selection process need to be mentioned?
Cavalli: One thing we haven't addressed is how you identify the individual who is given a company car, whether it be on a position level or a mileage/use level.
Dougherty: You risk wide-spread discontentment unless you can make strict corporate policies. What applies to a driver here has to apply to a driver there.
LaLiberty: Another key point is maintaining a high degree of flexibility in the selection process. When a car proves to be a bad model, maybe just because of changes in the industry, you need to be able to drop it.
Papazian: It's self-preservation. Like saying, when I do something good, nobody remembers, and when I do something bad, nobody forgets. You want to avoid that because your job is really to do the best job possible for management, and if you do pick a bad model, you're hurting management. You want to protect your company by doing the best job possible.
Hasler: In truth, the selection process isn't something that should just take place in May or June, and then be put away for review a year hence. It's something that is dynamic and should be underway at all time. If cars you've got on your selector prove to be inappropriate choices, you want the flexibility to eliminate them mid-year. If pricing changes, as it has been known to do in the middle of the year, or if incentives are offered, you should have the flexibility to respond quickly, because in so doing you can take advantage of some big-dollar opportunities for your company and head off some big-dollar pitfalls.